Starbucks (SBUX) Acquires Teavana for $620M

(Image credit: Mark Ralston/AFP/Getty Images)

Starbucks Coffee Co. (NASDAQ: SBUX) announced that it has agreed to acquire Teavana Holdings (NYSE: TEA) for $620 million, making headway in a growing $40 billion global tea industry.

Starbucks said it "plans to continue to grow and extend Teavana's already-successful 300 mall-based stores as well as add a high-profile neighborhood store concept that will accelerate Teavana's domestic and global footprint."

The company said it complements Starbucks' existing Tazo brand.

Starbucks stock fell 1.65 percent to $49.45 in late-afternoon trading. Shares of Teavana jumped over 27 percent to $12.88.

"We believe the tea category is ripe for reinvention and rapid growth. The Teavana acquisition now positions us to disrupt and lead, just as we did with espresso starting three decades ago," said Howard Schultz, Starbucks chairman, president and CEO. "Teavana's world-class tea authority, coupled with the romance and theater of the retail experience that is the heart and soul of Starbucks heritage, will create a differentiated customer experience and business opportunity that delivers immediate value to shareholders."

Teavana did not immediately return a request for comment.

The company, based in Atlanta, launched in 1997 and has stores in the U.S. and Mexico.

Teavana's IPO in July 27, 2011 was initially a great success. Its stock jumped 64 percent on its first day of trading. However, the stock closed that day at $27.80, well above its IPO price of $17 but later struggled to meet its first day IPO expectations again.

Teavana's goal was to be the "heaven of tea," selling premium tea and related products.

Teavana CEO and co-founder Andrew Mack said the company will continue to operate from its headquarters in Atlanta.

"Being part of Starbucks will give us access to incredible industry knowledge and know how as well as the financial strength to super charge our business and allow us to continue our rapid growth to the benefit of all our supporters including our dedicated employees worldwide," he said in a statement.