TLDR
- The Financial Times reports Starbucks explored a takeover of Chipotle Mexican Grill.
- Chipotle stock jumped 6% to close at $32.65, while Starbucks stock slipped 0.4% to $93.21.
- A deal would reunite Starbucks CEO Brian Niccol with Chipotle, where he led a turnaround before leaving in 2024.
- Analysts estimate a price tag near $50 billion, which could mean heavy borrowing for Starbucks.
- Starbucks declined to confirm the report, saying it remains focused on its own turnaround.
Starbucks stock slipped 0.4% to close at $93.21 on Thursday. Chipotle stock climbed 6% to $32.65 the same day. The moves followed a Financial Times report that Starbucks had explored buying the burrito chain.
The report said Starbucks had been working with advisors in recent months on a possible deal. Chipotle currently carries a market value near $41 billion. Starbucks is worth roughly $107 billion.
Starbucks would not confirm or deny the talks. A spokesperson said the company doesnât comment on rumors, adding that it remains focused on CEO Brian Niccolâs âBack to Starbucksâ turnaround plan. Chipotle did not respond to requests for comment.
Niccolâs Old Team, Reassembled
The pairing isnât as random as it sounds. Niccol spent about six years running Chipotle, guiding it past food-safety issues and building out its digital ordering business. He left in August 2024 to take the top job at Starbucks.
A few of his former Chipotle colleagues followed him there. Tressie Lieberman, once Chipotleâs VP of digital marketing, now serves as Starbucksâ global chief brand officer. Stephen Piacentini, a former Chipotle development officer, joined Starbucks this past April.
Current Chipotle CEO Scott Boatwright was the companyâs chief operating officer back when Niccol ran things. A merger would effectively bring that old leadership group back together.
RBC Capital Markets analyst Logan Reich said Chipotle shareholders would likely welcome Niccolâs return. He added that the logic for Starbucks is murkier, and investors have historically been skeptical of restaurant chains acquiring other brands.
Can Starbucks Afford It
Financing looks like the biggest hurdle. William Blair analysts estimated a price tag close to $50 billion for Chipotle, calling it âtough mathâ for Starbucks to pull off.
Starbucks reported $28.2 billion in total assets as of its fiscal third quarter, with only $3.4 billion in cash on hand. Thatâs down from $32 billion in assets a year earlier.
eToro strategist Lale Akoner said a deal could force Starbucks into heavy borrowing or issuing new stock. Without a clear financial payoff, she said, investors might view it as a costly distraction.
Annex Wealth Managementâs Brian Jacobsen called the timing âa little weird,â noting Starbucks is still mid-turnaround and hasnât yet delivered the margin improvement investors want to see.
Starbucksâ adjusted operating margin stood at 14.4% last quarter, down from 16.7% two years earlier, per LSEG data. The company has pledged over $500 million toward staffing and store upgrades, and closed about 250 underperforming cafes last month.
Analysts flagged one possible funding source: a sale of Starbucksâ Japan business.
Chipotle, meanwhile, trades well off its highs. Its stock surged 928% during Niccolâs tenure there but has dropped 37% since he left, which may make it a more affordable target now.
Thereâs a potential upside beyond nostalgia. Northcoast Research analyst Jim Sanderson pointed out that Chipotle could tap Starbucksâ licensed partnerships in Europe to speed up its overseas growth. Chipotle opened its first restaurants in Mexico and Saudi Arabia this year, adding to around 100 locations outside the U.S.
Starbucks runs roughly 40,000 stores globally, including about 18,000 in North America. Chipotle had 3,938 U.S. locations as of last year. Starbucks confirmed Thursday it still plans to report fourth-quarter results and its next fiscal year outlook later this month.
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