Unilever PLC (NYSE: UL) shares reacted little to the announcement that the company would be acquiring the Tazo brand from Starbucks Corp. (NASDAQ: SBUX). Starbucks reported quarterly results after the markets closed on Thursday, and the big story was that the coffee giant would be losing Tazo.
Under the asset purchase agreement, Unilever will acquire the Tazo brand and all related intellectual property, signature recipes and inventory for $384 million. The transaction represents a multiple of 10 times pro forma EBIT. In the past year, Tazo had sales of $112.5 million.
Tazo was founded in 1994, and it has a strong position in specialty black, green and herbal teas, as well as liquid concentrates focused in the chai latte segment. The fast-growing specialty tea segment makes up 48% of the total $1.6 billion in fiscal 2016. Tazo is sold primarily in grocery, mass and convenience channels in the United States and Canada, and it is offered in formats including packaged teas, K-Cup pods and bottled ready-to-drink teas.
Kees Kruythoff, president of Unilever North America, commented:
With its strong appeal to millennials, TAZO is a perfect strategic fit for our US portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington’s. Tazo’s solid position in the fast-growing specialty tea segment, coupled with Unilever’s tea expertise, presents a fantastic growth opportunity.
In terms of Starbucks earnings, the company posted adjusted diluted earnings per share (EPS) of $0.54 on revenues of $5.7 billion. In the same period a year ago, the company reported EPS of $0.56 on revenues of $5.71 billion. Fourth-quarter results also compare to consensus estimates for EPS of $0.55 and $5.8 billion in revenues.
Shares of Unilever were last seen up fractionally $56.00, with a consensus analyst price target of $60.00 and a 52-week range of $38.58 to $60.13.
Starbucks traded at $55.90 Friday morning. The stock has a 52-week range of $50.84 to $64.87 and a consensus analyst price target of $63.98.