Starbucks CEO Brian Nicol suggested the coffee giant’s China operations are worth more than previously thought, CNBC’s Jim Cramer said Thursday. After interviewing Nicol on Wednesday night’s “Mad Money,” Kramer said the CEO sent him a letter saying: “We expect the value of our China operations to Starbucks to be in excess of $10 billion, which includes upfront investments by potential partners, their equity interests in Starbucks’ China operations, and future royalty payments,” Kramer read in a statement Thursday morning on “Squawk on the Street.” Starbucks stock rose nearly 2% on the transaction. Back in July, it was reported that Starbucks China was attracting offers to sell its stake, valuing the coffee chain’s Chinese operations at up to $10 billion. Starbucks has no intention of selling its China operations completely and is instead looking for a partner to help it weather increased domestic competition from Chinese rivals such as Luckin Coffee. Five private equity groups submitted offers last week, according to the Financial Times. The FT also reported in a Wednesday night article that U.S.-based Carlyle and Chinese-backed Boyu Capital are likely candidates. At a Thursday morning meeting for members of the CNBC Investment Club, Cramer said Nicol’s $10 billion estimate is “significantly elevated.” He added: “So China, which was supposed to be a black hole, which was a big story (betting on stock prices), is now going to be able to create something good for them.” SBUX YTD Mountain Starbucks YTD What to do with China is a major issue surrounding Mr. Nicol’s restructuring plan for Starbucks, which has only been a little over a year since he took office as CEO. Nicole comes to Starbucks from Chipotle, where she successfully overhauled its brand and delivered impressive price-to-earnings returns. When Nicol was announced as Starbucks’ new CEO, Wall Street had high hopes for him. But fixing the coffee giant’s problems quickly proved difficult. Mr. Kramer reiterated his support for Mr. Nicol, asserting on Thursday that the CEO’s aggressive strategy to close underperforming Coffeehouse stores and open winning stores and devoting resources “will generate higher comp store sales.” Kramer added that this reversal in sales “could cause the stock price to rise dramatically.” “If you don’t have it, I’ll buy Starbucks,” Kramer concluded. (Jim Cramer’s Charitable Trust is a long SBUX. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
