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Nestlé Deal To Accelerate Starbucks Buybacks, Expand Global Market

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Nestlé Deal To Accelerate Starbucks Buybacks, Expand Global Market
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Starbucks Corporation (NASDAQ: SBUX) announced Monday a “global coffee alliance” with Nestlé (OTC: NSRGY) to leverage the latter’s worldwide scale.

Under the new partnership, Nestlé will sell Starbucks-packaged coffee and Teavana tea in regional markets and offer the Starbucks brand in its single-serve capsules.

"This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé," Kevin Johnson, president and chief executive officer at Starbucks, said in the joint announcement.

Nestlé will pay Starbucks $7.15 billion for the rights, which will be used to accelerate share buybacks and help achieve $20 billion in buybacks and dividends through 2020, according to the press release. Starbucks will also retain “a significant stake” as a licensor and supplier.

The deal is seen to help improve Nestlé’s position in a generally no-growth U.S. coffee market, ABN AMRO analyst Maurits Heldring said on CNBC.

"This transaction is a significant step for our coffee business, Nestlé's largest high-growth category," Nestlé CEO Mark Schneider said in the release.

The companies intend to secure regulatory approve and close the agreement this summer or early fall.

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