Starbucks to pay $2.76 billion in Kraft grocery rift

Tue Nov 12, 2013 6:15pm EST
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By Lisa Baertlein

(Reuters) - Starbucks Corp must pay Kraft Foods $2.76 billion after it ended the companies' grocery deal at least three years early, the coffee chain said on Tuesday.

Mondelez International Inc spun off Kraft Foods, its North American grocery operations as an independent company in October 2012. Under an agreement between those two companies, Mondelez will receive all proceeds from the Starbucks-Kraft dispute.

An arbitrator ruled that Starbucks must pay $2.23 billion in damages plus $527 million for interest and legal fees, Starbucks said.

Based on the rules of binding arbitration, Starbucks cannot appeal.

The payment was larger than Wall Street expected, but roughly in line with the nearly $3 billion Kraft had sought, two analysts told Reuters.

Shares in Starbucks were down 1.2 percent at $79.41 in extended trading. Mondelez shares were up 3.3 percent at $33.51.

"We strongly disagree with the arbitrator's conclusion," Starbucks said in a statement.

Starbucks has adequate liquidity both in the form of cash on hand and available borrowing capacity to fund the payment, which will be booked as a charge to its fiscal 2013 operating expenses, the company said in a statement.   Continued...

A Starbucks logo hangs on a window at a newly designed Starbucks coffee shop in Fountain Valley, California August 22, 2013. REUTERS/Mike Blake