Chipotle Slides 4% as Starbucks Says It Is Not Buying the Burrito Chain, Wiping Out Last Week's Deal Pop

Chipotle Mexican Grill (CMG) fell on Monday, Oct. 12, after Starbucks (SBUX) said it is not buying the burrito chain, ending several days of takeover speculation. At 12:36 PM ET, Chipotle was down 4.40% at $30.20 and Starbucks was up 1.59% at $92.19. A Starbucks spokesperson said the company does not normally comment on rumors, "but we want to be clear we are not buying Chipotle."

From report to denial

The Financial Times reported on Thursday, Oct. 8, citing people familiar with the matter, that Starbucks had spent recent months working with advisers on a possible takeover proposal for Chipotle. The FT described the plans as early-stage and said they might never get off the ground. Semafor had reported earlier in October that Chipotle hired advisers to guard against activist investors or an unwanted bid. A deal at Chipotle's roughly $39 billion to $41 billion market value would have been the largest in restaurant history, well above Burger King's $11.4 billion purchase of Tim Hortons in 2014.

Thursday's intraday figures are from XTB; Monday's are midday quotes as of 12:36 PM ET. Working backward from XTB's figures, Chipotle's pre-report price was roughly $30.80, so it now trades slightly below where it started before the report. Starbucks' implied pre-report price was roughly $93.60, so it has recovered most, but not all, of its drop.

Why Starbucks investors were uneasy

Starbucks shares fell on the report, and CNBC reported that Starbucks shareholders broadly worried a high-profile merger would be an expensive distraction from the coffee chain's turnaround. Analysts also questioned the logic. RBC's Logan Reich cited "limited overlap between the businesses," and TD Cowen's Andrew Charles called a deal "a low-probability outcome at this stage."

Starbucks is still working through its own recovery. Its comparable sales have grown for four straight quarters, but its adjusted operating margin was 14.4% in the latest period, down from 16.7% two years earlier, per CNBC.

The Niccol factor and Chipotle's slump

The deal talk had an obvious storyline: Starbucks CEO Brian Niccol ran Chipotle for six years before taking the Starbucks job in September 2024. Chipotle's stock has lost roughly half its value since he left, which made it look like a cheaper target to some investors, while Starbucks shares are up. Chipotle's shares are down about 20% over the past year, and its same-store sales have not exceeded 2.2% in any of the past six periods, with half of them negative, according to Nation's Restaurant News.

Chipotle has not publicly commented on the Starbucks report in the coverage I found. With the takeover premium gone, the stock is back to trading on its own results.