Bidders have reportedly offered up to $5 billion for a portion of Starbucks' China operations, signaling a significant potential divestment amidst intense local competition and shifting market dynamics.

U.S. equities saw increased focus on Starbucks (SBUX) following reports that bidders have submitted offers valuing a portion of its China operations at up to $5 billion. This potential divestment underscores the evolving competitive landscape for multinational corporations in the key Chinese market and could mark one of the most substantial unit sales by a global consumer company in the region in recent years.

The Event in Detail

Sources close to the deal discussions indicate that most of the non-binding bids received by Starbucks for a stake in its China business value the unit at approximately $5 billion. This valuation is generally based on an expected EBITDA (earnings before interest, taxes, depreciation, and amortisation) of $400 million to $500 million in 2025, implying a multiple of roughly 10 times EBITDA. At least one bidder reportedly offered a multiple in the high teens. Starbucks is reportedly considering selling a 70% stake in its China operations, while retaining a 30% interest.

Among the reported interested parties are private equity firms such as KKR, Carlyle Group (CG), and Hillhouse Capital, as well as other investors including Centurium, Tencent, and JD.com.

Analysis of Market Reaction and Strategic Context

The reported bids highlight Starbucks' strategic re-evaluation in a market where it has faced growing headwinds. The move comes as the company's market share in China has significantly declined, falling from 34% in 2019 to 14% recently. This erosion is largely attributed to aggressive competition from agile local rivals, most notably Luckin Coffee.

Luckin Coffee has rapidly expanded its footprint, operating over 26,000 stores globally as of Q2 2025, with 2,109 new openings in that quarter alone. Its strategy, focusing on lower-priced products and increasing presence in smaller Chinese cities, has allowed it to gain substantial market share. Financially, Luckin Coffee reported a 47.1% year-over-year revenue surge in Q2 2025, alongside a 13.4% same-store sales increase for its self-operated stores and an operating margin of 21%. In comparison, Starbucks China saw an 8% year-over-year revenue rise to $790 million and a 2% increase in comparable store sales in Q2 2025, modest gains against Luckin's robust performance.

While Starbucks' global enterprise value stands at approximately 20.6 times its trailing 12-month EBITDA, and 19.3 times its forecast EBITDA for the next 12 months, the reported 10x EBITDA valuation for its China operations reflects the intense competitive pressures and perhaps a more cautious outlook on the market's immediate future for the foreign brand. Luckin Coffee is currently valued at roughly 9 times its projected EBITDA for the next 12 months, indicating a similar valuation multiple to that offered for Starbucks China.

Broader Context and Implications

This partial divestiture by Starbucks signifies a broader trend among multinational corporations adapting their business models in China. By potentially partnering with local entities and private equity firms, Starbucks aims to balance capital intensity with maintaining long-term value. This strategy could enable the company to reallocate capital, distribute risk, and leverage local expertise to navigate China's dynamic consumer landscape and regulatory environment, mirroring approaches taken by companies like McDonald's (MCD) and KFC.

The strategic focus for Starbucks post-divestment is expected to include localized innovations, such as sugar-free options and price adjustments, and potentially expanding into more affordable store formats or increasing its tea and ready-to-drink offerings to counter Luckin's market penetration.

Looking Ahead

Investors will closely monitor the outcome of these bidding processes and the subsequent strategic direction Starbucks takes in China. The success of this partial divestment hinges on several factors, including the final valuation realized, the synergies achieved with new partners, and, critically, Starbucks' ability to reverse its declining market share through renewed initiatives. The competitive dynamics in China's rapidly expanding coffee market are likely to remain intense, with continued shifts in consumer preferences towards value and convenience.