If you want to see a merger that makes a whole lot of sense, it is the acquisition which was confirmed today. Teavana Holdings, Inc. (NYSE: TEA) is going to be acquired by Starbucks Corporation (NASDAQ: SBUX). Now a coffee empire will be joined by a tea empire of sorts. Starbucks even called this a $40 billion global market opportunity which is ripe for innovation.
The buyout is an all-cash acquisition at $15.50 per share. The deal is valued at $620 million, but Starbucks said that it would be accretive to its 2013 by about $0.01 per share. Starbucks also said that some 70% of the Teavana shares have approved the merger due to such a large share of insider ownership.
Teavana offers more than 100 varieties of premium loose-leaf teas, as well as authentic artisanal teawares and other tea-related merchandise. It has a network of some 300 company-owned stores and its website sales.
This buyout makes perfect sense for Starbucks. Unfortunately, those shareholders who bought at the IPO and after the IPO who held on in hope that this would become “The Starbucks of Tea” are not getting a great deal. The IPO was supposed to price around $13 to $15 but priced up at $17.00 per share. Shares then went from $20 to almost $30 in the period immediately after its IPO. Here were the first ratings from analysts given which we tracked when the quiet period ended right after the IPO:
- Bank of America/Merrill Lynch started coverage with a neutral rating.
- Goldman Sachs initiated the company with a Neutral rating and a $25 price target.
- Morgan Stanley initiated with a Equal-Weight rating.
- Piper Jaffray initiated coverage with a Overweight rating and $27 price target.
- Stifel Nicolaus initiated coverage with a Hold rating.
- William Blair initiated coverage with a Outperform rating.
Sadly, shares had recently traded under the $10 mark just today to an all-time low even though the prior 52-week range was $10.03 to $26.03.
JON C. OGG