Nestle paying $7.2 billion to sell Starbucks coffee

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Schultz, 64, is responsible for building Starbucks from just 11 stores in 1987 to a coffeehouse giant that has about 29,000 stores worldwide which serve 100 million customers each week.

The deal will transfer the company's packaged and food service business to Nestlé, which will pay $7.15 billion plus other ongoing payments to do so.

Nestle and Starbucks are joining forces in a highly fragmented consumer drinks category that has seen a string of deals lately.

Meanwhile, Starbucks has also confirmed that as part of this deal Nestle will get the right to sell its packaged coffee products under its brands including Starbucks VIA, Torrefazione Italia and Seattle's Best Coffee.

Swiss-based Nestle, the world's largest food and beverage company, will pay Starbucks Corp $7.15 billion in cash for exclusive rights to sell the USA chain's packaged coffees and teas around the world, tying a premium brand to Nestle's global distribution muscle.

Nestle already has a sizable presence in the coffee business with established brands like Nescafe and Nespresso.

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Coffee is a growth area for big food and drinks companies, which are trying to offset falling sales as demand for smaller-brand labels grows.

Starbucks will use proceeds to increase planned stock buybacks to $20 billion from $15 billion through fiscal 2020.

The deal is Nestle's first tie-up with a major rival in coffee. This includes speeding up its share buyback plan. The Nestle name will not appear on Starbucks products.

Nestle CEO Mark Schneider said it was "a great day for coffee lovers". In a separate statement, Nestle said it expected the business to contribute positively to its earnings per share and organic growth targets from 2019.

Under the deal, Nestle will consolidate its position as the world's biggest coffee company - a market that is changing fast. JAB Holding Co, which is owned by Peimann Family has invested more than $30 billion in creating its coffee empire. The agreement only covers Starbucks' packaged goods sold outside the United States company's stores.

Nestle shares rose 1.1 percent as of 12:07pm in Zurich.