By Anuja Bharat Mistry and Neil J Kanatt
Oct 12 (Reuters) – Starbucks is not buying Chipotle Mexican Grill, the coffee chain said on Monday, quashing talk of a deal that could have been the largest-ever involving restaurants but was doubted by both investors and analysts.
“As a matter of policy, we don’t comment on rumors and speculation, but we want to be clear we are not buying Chipotle,” a Starbucks spokesperson said. Chipotle declined to comment.
The statement follows a report by the Financial Times on October 8 that Starbucks had worked with advisers in recent months on a potential proposal to acquire Chipotle, citing people familiar with the matter.
Starbucks did not respond to a request for comment on whether they approached advisers for a deal.
Shares of the coffee chain were up 1% in early trading, while Chipotle, whose shares surged on the prospect of a takeover which would have reunited Starbucks CEO Brian Niccol with the burrito chain he led for six years, fell about 4%.
Starbucks also reiterated that its management was “laser focused” on “Back to Starbucks” strategy and had “strong momentum and confidence” in its long-term growth prospects. The company aims to share its fourth-quarter results and fiscal 2027 outlook later this month.
Starbucks shares have gained 7.8% this year, roughly half the gain in the S&P 500 over the period. The chain has been closing dozens of underperforming stores as part of a turnaround led by Niccol, who has tried to draw back customers with shorter wait times and simpler menus.
TAKEOVER SPECULATION
The report of a potential deal last week prompted the investor community to speculate about a tie-up that would have brought together two of the largest US restaurant brands.
Chances of a deal sent Chipotle shares up more than 7% and Starbucks down about 3%, even as several analysts questioned the strategic rationale as Starbucks was in revival mode under Niccol.
“Rumors like these can prime investment bankers to start fantasizing about all sorts of tie-ups, but they’re a tough sell. The tide has been shifting more toward divestitures than acquisitions,” From Brian Jacobsen, chief economic strategist at Annex Wealth Management said.
A potential deal would have created a restaurant giant with about $50 billion in annual sales, positioning it to better navigate uncertain demand from inflation-hit consumers, rising operating costs and the squeeze on profits. The burrito chain has a market capitalization is around $40 billion.
NICCOL’S CHALLENGE
“Funding a premium takeover price would likely require a mix of debt and equity, which would test leverage and could dilute existing shareholders while Starbucks is still executing its turnaround,” Paren Knadjian, Partner at Transaction Advisory Services, EisnerAmper said last week.
Niccol joined Starbucks in 2024 after leading Chipotle through a period of rapid growth and digital expansion.
He was credited with reviving the burrito chain after its food-safety crises and expanding its digital business, helping accelerate sales growth.
Chipotle, meanwhile, has grappled with softer traffic as consumers cut back spending, while higher food and labor costs hurt margins across the restaurant industry. Their shares have nearly halved in value since Niccol’s departure.
(Reporting Anuja Bharat Mistry, Sanskriti Sekhar and Neil J Kanatt in Bengaluru, writing by Aishwarya Venugopal; Editing by Christian Plumb and Arun Koyyur)
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