Starbucks Should Avoid a Chipotle Acquisition, Analysts Say

Starbucks reportedly explored a deal to buy Chipotle Mexican Grill, which would be the largest U.S. restaurant-chain acquisition ever. Analysts and investors worry the move would distract CEO Brian Niccol from Starbucks’ turnaround and offer few synergies. With Chipotle valued around $40 billion, Starbucks would likely need to borrow heavily for a $50 billion purchase.

The Financial Times reported this week that Starbucks had looked at a possible Chipotle purchase. Such a combination would rank as the biggest U.S. deal in which one restaurant chain buys another. Chipotle’s roughly $40 billion market value means a typical 20% premium could push the price near $50 billion, about half Starbucks’s current worth, likely requiring tens of billions in borrowing.

Analysts see few operational overlaps: Starbucks emphasizes drinks and mostly prepared food, while Chipotle cooks meals fresh. William Blair projected only about $300 million in yearly corporate and technology savings. Chipotle shares briefly rose 8% after the report, then fell back; Starbucks shares declined. Observers tie the idea mainly to CEO Brian Niccol’s prior Chipotle turnaround.

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