Luckin Coffee Is Said to Consider Bidding for Nestle’s Blue Bottle
(Bloomberg) — China’s Luckin Coffee Inc. is considering making a bid for Nestle SA’s Blue Bottle Coffee to boost its brand profile and expand in the premium coffee segment, according to people familiar with the situation.
China’s biggest coffee chain and its backer Centurium Capital have also been evaluating other acquisition targets, including the operator of % Arabica coffee stores in China, which counts private equity firm PAG as an investor, the people said, asking not to be identified discussing private information.
Luckin and Centurium had been considering Coca-Cola Co.’s Costa Coffee as well, though they aren’t likely to proceed on that, the people said.
Luckin’s American depositary receipts dropped 7.3% on Tuesday, the biggest decline since April. They have gained 25% this year, giving the company a market value of $9 billion.
Deliberations are at an early stage and may not lead to a bid, the people said. Representatives for Nestle, PAG and Coca-Cola declined to comment, while Centurium, Luckin and % Arabica didn’t immediately respond to requests seeking comment.
Founded in 2017, Luckin has expanded with thousands of stores offering low-cost coffee and other customized drinks such as coconut or cheese lattes. The growth has been rapid, enabling it to sweep past Starbucks Corp. in store numbers in China, where the US coffee chain has decided to sell a majority stake in its local business to Boyu Capital.
Luckin’s fortunes have improved since it was delisted from the Nasdaq in 2020 due to an accounting scandal. Net revenue was $2.1 billion in the quarter through September, a 50% increase from a year earlier, and net income was about $180 million. It opened a net 3,008 new stores in the quarter, including five in Singapore, 21 in Malaysia and three in the US, taking its total worldwide to 29,214.
Nestle has been working with Morgan Stanley to review options for Blue Bottle, Reuters reported this month. Blue Bottle was founded in California in 2002, and Nestle invested in the company 15 years later, paying about $425 million for a 68% stake, Bloomberg News reported at the time. In addition to the US, Blue Bottle has outlets in China, Hong Kong, Japan, Singapore and South Korea.
% Arabica was founded in 2013 and has stores in Asia and the Middle East, as well as some in Europe and the Americas. The bulk of them are in mainland China, where it has more than 80 outlets, the company’s website shows.
–With assistance from Fabienne Kinzelmann and Kristina Peterson.
(Updates with Luckin’s ADRs in fourth paragraph.)
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