Why a Starbucks takeover of Chipotle would — and wouldn't — make sense for both companies — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Starbucks has explored buying Chipotle Mexican Grill in recent months with help from advisers, according to the Financial Times, sending Chipotle shares up ~7% Thursday afternoon while Starbucks fell ~4%.
- Brian Niccol, Starbucks' CEO since 2024, previously led Chipotle for more than six years and engineered its post-foodborne-illness turnaround, giving him unique insight into the target — but Chipotle shares have lost ~40% of their value since his departure.
- The deal would unite the #2 US chain by sales (Starbucks, ~$31B annual domestic) with the #7 (Chipotle, ~$11B), and Stephens research notes ~90% of Chipotle locations sit within one mile of a Starbucks cafe.
- D.A. Davidson analyst Matt Curtis puts the odds of a completed deal at ~20%, while BTIG's Pete Saleh warned that integration would distract from Starbucks' unfinished turnaround — which already includes a reportedly planned sale of a majority stake in its Japan business.
- Chipotle carries a market cap of ~$42 billion, and William Blair estimates Starbucks' leverage could balloon to roughly 6x if it financed the purchase primarily through debt on top of its existing ~$9.4B load.
- Industry history offers a stark warning: Jack in the Box bought Del Taco for $585 million in 2022, watched its own shares crater 73% during the ownership period, and ultimately sold Del Taco for ~$119 million.
Why it matters: Starbucks is still mid-turnaround with ~$9.4B in debt and competing priorities like the Japan stake sale; financing a $42B-plus Chipotle acquisition could push leverage to ~6x per William Blair, and the Jack in the Box/Del Taco precedent shows restaurant megadeals can destroy ~73% of the acquirer's equity.
Ask SkimNews
