Starbucks’ [NASDAQ: SBUX] excessive spending, underlevered balance sheet and carve-out opportunities make the coffee retailer a potential activist target, two sector advisors and an activist investor said.
Only a handful of funds can pull the trigger against the Seattle-based group given its size, these sources agreed. The investor estimated that, in order to have an impact, an activist would need to buy around 3% of the company, accounting for an investment of roughly USD 2.4bn.
Starbucks has a market cap of USD 82.5bn. The company did not return a request for comment.
The exclusive roster includes Elliott Management, Third Point, Trian Partners and Pershing Square, they said. One of them did not rule out other well-established names like Carl Icahn, Jana Partners, Starboard Value and ValueAct Capital.
Pershing Square was close to launching a campaign against Starbucks a decade ago when shares were at 7 USD, in a different investment environment, a source familiar with the fund said.
Any activist doing work on Starbucks today should study the white paper Pershing Square published on McDonald’s [NYSE:MCD] in 2005, the first advisor said. The New York-based fund declined to comment.
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By David Carnevali