Starbucks

It is recommended that Starbucks acquires Caribou Coffee (CBOU). Caribou is a direct competitor to Starbucks, which is the appeal. Caribou's existing locations can be either closed out or converted to Starbucks locations. Caribou is a strong regional brand with 541 coffeehouses (MSN Moneycentral, 2012). The company has a very similar business model to Starbucks, but with less size and arguably less business sophistication. Caribou is, nonetheless, a successful company that is now turning a profit ($35.22 million in FY2011) after many years of losses.

Caribou stock is currently trading at $16.93 per share, giving the company a market capitalization of $352.96 million. The offer for Caribou will need to be higher. An acquisition premium of 10% is reasonable (McClure, 2012), however, because there is only limited opportunity for synergies to add value to Caribou, and because Caribou stock is already trading near its all-time high. A 10% premium...
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