Starbucks has explored buying Chipotle, the chain its CEO used to run

Brian Niccol left Chipotle Mexican Grill to run Starbucks in 2024. On Thursday, a report suggested he may want to bring the two companies together.

Starbucks has explored a takeover of Chipotle, the Financial Times reported, and has worked with advisers on a proposal in recent months. A combination would rank as the largest deal ever in the restaurant sector, the FT said. People familiar with the matter cautioned that the discussions may not lead to a transaction, given the complexity of combining two consumer businesses of that size. Neither company had announced anything as of the close.

How the two stocks traded

The market reaction followed the usual pattern for a reported takeover: the potential target rose and the potential buyer fell. The second half of that pattern faded as the day went on.

Chipotle closed up 6.21% at $32.68. Starbucks was down about 5% at midday, according to CNBC, and around 3% lower in the morning, according to 24/7 Wall St., but it recovered most of that ground and finished down 0.4% at $93.21. Investor's Business Daily also noted that Starbucks pared its early decline.

Starbucks has a market value of about $103 billion and Chipotle about $41 billion, according to figures compiled by StockAnalysis around the time of the report.

The Niccol connection

The history between the companies runs through one person. Niccol was Chipotle's chief executive for about six years and oversaw a long period of growth there before Starbucks hired him to lead a turnaround. Starbucks shares rose 24% on the day his appointment was announced in 2024, StockAnalysis noted.

Chipotle has had a harder time since. CNBC reported that the stock has lost about 40% of its value since Niccol left and, even after Thursday's gain, is trading about 20% below where it was a year ago. A weaker share price can make a company more affordable for a buyer, which is one reason investors took the report seriously.

At Starbucks, the turnaround is still under way. CNBC reported that early signs show improvement in the US business, and Niccol told employees in a September memo that the company aims to be "the world's greatest customer service company." Starbucks is also weighing other moves; Reuters reported in September that it was considering selling a majority stake in its Japan business.

Why the market is skeptical

Not everyone expects a deal. D.A. Davidson analyst Matt Curtis wrote in a note to clients that he views the odds of a completed transaction as "relatively low," about 20%, CNBC reported.

There are practical reasons for caution. Starbucks would be taking on a full integration while its own restructuring is incomplete, a point 24/7 Wall St. raised. The way Thursday's trading unfolded also says something: if investors had strongly believed Starbucks was about to pay a large premium, its stock would probably have stayed under more pressure. Instead it closed nearly flat.

Analysts at Newsquawk described the report as sitting at the weaker end of the M&A spectrum, because it describes exploration rather than active negotiations, and because the sourcing itself flagged that talks might not produce a deal.

What would make it real

Reported deal interest becomes a live process when the details harden: a formal approach, named advisers, a confirmed price or a statement from one of the companies. None of that existed at Thursday's close. Until it does, Chipotle's 6.21% gain reflects a possibility rather than an offer.

For investors following either stock, the more concrete issues have not changed. Starbucks is still in the middle of a turnaround under Niccol, and Chipotle is still working to recover from a weak stretch. A takeover would change the answer to both questions at once, which is why one newspaper report was enough to move the shares.