Apollo Global Management in Talks to Acquire Stake in Starbucks Franchise

U.S. private equity firm Apollo Global Management Inc. is in discussions to purchase a minority stake in the Middle East, North Africa, and Central Asia Starbucks franchise operated by Kuwait's AlShaya Group. The privately-owned retailer is seeking to sell approximately 30% of its business in a minority stake, as reported earlier by Reuters.

Potential Involvement of Saudi Arabia's Sovereign Wealth Fund

According to Reuters, the talks also involve Saudi Arabia's sovereign wealth fund, the Public Investment Fund (PIF), which had previously been shortlisted as a potential buyer for the stake. The Starbucks franchise operates around 2,000 outlets across 13 countries in the Middle East and North Africa, as well as Kazakhstan and Azerbaijan.

Before the franchise exited the Russian market in 2022, its valuation was estimated to be between $4 billion and $5 billion.

Impact of Israel-Hamas Conflict on Starbucks Business

Nasdaq noted that Starbucks disclosed in January that the Israel-Hamas conflict negatively affected its operations in the region, significantly impacting sales. The company missed market expectations for its first-quarter results.

Consumer protests and boycott campaigns emerged, urging Starbucks to take a stance on the issue. However, Starbucks clarified that it is a non-political organization and dismissed rumors of providing support to the Israeli government or army.

Despite the challenges faced during the conflict, Starbucks affirmed its commitment to its growth ambitions in the international segment. If the deal materializes, it would broaden the investor base of the Alshaya family's privately owned business, which has been held since 1999. This move aligns with the trend among major private companies in the Middle East seeking outside investors through strategic stake sales or listings.

Established in 1890, Alshaya is a prominent retail operator in the region. It owns rights to popular Western brands, including The Cheesecake Factory, Shake Shack, and Pottery Barn. In 2022, AlShaya complied with Starbucks' decision to withdraw from Russia and closed 130 stores due to the country's war with Ukraine.

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