Starbucks says $2.76 billion Kraft split was necessary
By Lisa Baertlein
(Reuters) - Starbucks Corp on Wednesday said breaking up with Kraft was hard to do, but worth the high price, after an arbitrator ruled it must pay a whopping $2.76 billion for ending the companies' grocery coffee partnership early.
The world's biggest coffee chain will restate results for the latest quarter to show an operating loss and issue debt following the bigger-than-expected award.
The payment resolves a three-year spat between the two U.S. brand titans and illustrates how costly it can be to sever a contract.
"It's difficult when a decision like this goes against you. But it is a one-time charge in a single moment in time, and now it's behind us," Starbucks Chief Executive Howard Schultz said on a conference call with analysts on Wednesday.
Starbucks has been posting strong revenue and profit gains despite the lackluster U.S. economy, and Schultz said the split cleared the way for the chain to significantly expand packaged coffee product sales in the grocery aisle.
It "was, without question, the right strategic decision for Starbucks, our brand and our shareholders," Schultz said.
Starbucks shares closed up 1.1 percent at $81.46, after several analysts said the company's long-term growth prospects remained promising.
Kraft Foods Inc split into two companies in October 2012, Kraft Foods Group Inc and Mondelez International Inc. Under an agreement between those two companies, Mondelez will receive all proceeds from the resolution of the Starbucks-Kraft dispute. Continued...