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Shares in Uni-President, President Chain Stores hit by Starbucks deals

2017/07/28 13:51:37

Taipei, July 28 (CNA) Shares in food brand Uni-President Enterprises Corp. (統一) and 7-Eleven convenience store chain operator President Chain Store Corp. (統一超) came under pressure on Friday after the two companies agreed to sell their stake in Starbucks Shanghai to Seattle-based Starbucks Corp., dealers said.

Investors rushed to sell the two Taiwanese stocks amid fears that the disposal will impact the companies' bottom line as they lose the chance to explore the lucrative coffee market in Shanghai, they said.

Shares in Uni-President had fallen 3.47 percent to close at NT$58.40 (US$1.93) and shares in President Chain Store had lost 7.80 percent at NT$266.00. Both underperformed the broader market, where the weighted index closed down 0.81 percent, at 10,423.05.

"Many investor thought it was a pity the two companies sold their stake in Starbucks Shanghai since they will be left behind in the coffee chain market of a huge Chinese city,"Hua Nan Securities analyst Kevin Su said.

"To many investors, the Shanghai market is like a goose laying golden eggs," Su said.

At a press conference held on Thursday, Uni-President and President Chain Store announced that their joint venture agreement with the U.S. parent company is expiring and an agreement has been reached that they will sell their 20 percent and 30 percent stake in Starbucks Shanghai, back to the U.S. company for NT$16.04 billion and NT$24.07 billion.

After the disposal, Starbucks Shanghai will be brought entirely under the U.S. firm's corporate umbrella. The transactions are expected to allow Uni-President and President Chain Store to rake in about NT$33.5 billion in profit.

If the transactions are completed by the end of this year, Uni-President's earnings per share for 2017 will be boosted by NT$2.35 and President Chain Store's EPS by NT$19.3, the companies said.

"However, the gains from the stake disposal are a one-time event. investors wanted the two companies to continue to generate sales from the Shanghai market," Su said.

In turn, Uni-President and President Chain Store have also agreed to buy a 20 percent and 30 percent stake in Starbucks Taiwan, from the U.S. firm for NT$2.17 billion and NT$3.25 billion. Added to their existing stake in the company, the new acquisitions will mean the two Taiwanese firms hold a 100 percent stake in Starbucks Taiwan.

Starbucks Shanghai currently operates about 1,300 stores, while Starbucks Taiwan has 413 stores.

In 2016, Starbucks Shanghai posted about NT$4.13 billion in profit on revenue of NT$28 billion, while Starbucks Taiwan recorded NT$770 million in profit on NT$9.6 billion in revenue.

"The two stocks moved lower largely because of the Starbucks deals today but I don't expect the downturn to last too long and to be capped since they have built a solid brand image in the food and retail markets,"Su said.

Uni-President Group (統一集團) Chairman Lo Chih-hsien (羅智先) has vowed to seek alternative sales sources to make up the loss resulting from the disposal of the Shanghai assets of Starbucks.

(By Tien Yu-pin and Frances Huang)