The majority of bidders pursuing a stake in U.S. coffee chain Starbucks (SBUX)’s Chinese operations are valuing the company at up to $5 billion, Reuters reported on Friday, citing two insiders. Months earlier, however, another media report had put the maximum valuation at $10 billion.
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The new highest valuation puts Starbucks China’s value at 10 times its earnings before interest, tax, depreciation, and amortization (EBITDA). EBITDA measures how much money a company makes from its core business—before subtracting costs like taxes, loan payments, and wear-and-tear on assets.
Starbucks China’s EBITDA this year currently stands between $400 million and $500 million. At least one of the bidders is also proposing an EBITDA multiple in the upper teens.
Starbucks Shops for Bids
The new revelation comes weeks after it became public that the American coffee maker had started inviting offers for a stake in its operations in China in the face of intense competition from domestic brands such as Luckin (LKNCY).
The firm sought bids from private equity companies such as Carlyle (CG), EQT (EQT), Primavera Capital, and Hillhouse Investment. Other potential investors included Bain Capital, KKR & Co. (KKR), and Tencent (TCEHY).
Starbucks has yet to disclose just how much of its control of the Chinese operations it is willing to let go. However, CEO Brian Niccol in May confirmed that the roastery reserves operator will continue to maintain a significant portion of the unit.
Rivals such as Luckin have been deepening their market presence by banking on lower prices and making inroads into smaller cities. This is even as a weaker economy exerts pressure on consumer demand.
The American multinational has seen its market share in China drop from 34% in 2019 to 14% as of last year, according to data from Euromonitor International. In the third quarter of Fiscal year 2025, results released in late July, Starbucks reported a total company net revenue of $9.5 billion, representing a 3% increase from the same period last year. However, the global comparable store sales—which measure stores that were open for at least 12 months before the quarter kicked off—saw a decline of 2%.
On the contrary, Starbucks China achieved 2% comparable store sales growth and 6% transaction growth, thereby helping the international segment to hit a record-breaking quarterly revenue. Global revenue in that quarter surpassed $2 billion for the first time.
Is Starbucks a Buy or Hold?
Turning to Wall Street, Starbucks’ shares on TipRanks have a Moderate Buy consensus recommendation based on 14 Buy, eight Hold, and two Sell ratings by Wall Street analysts. The average SBUX price target over the last three months is $100.68, which suggests a 15.71% upside potential from its current price.
