A years-long contract fight between Starbucks and Kraft ended on Tuesday with an agreement the coffee maker will cough up $2.7 billion.
Mondelez International spun off Kraft Foods as an independent company in October 2012. Under an agreement between those two companies, Mondelez will receive all proceeds from the Starbucks-Kraft dispute.
An arbitrator ruled that Starbucks will pay $2.2 billion in damages and over $500 million in additional fees to Mondelez, the companies said. The agreement was not made public but both companies issued statements.
hares in Starbucks were down 1.2 percent at $79.41 in extended trading. Mondelez shares were up 3.3 percent at $33.51.
“We strongly disagree with the arbitrator’s conclusion,” Starbucks said in a statement.
Starbucks has adequate liquidity both in the form of cash on hand and available borrowing capacity to fund the payment, which will be booked as a charge to its fiscal 2013 operating expenses, the company said in a statement.
Kraft began selling bags of Starbucks coffee in grocery stores beginning in September 1998. Starbucks prematurely ended the contract in March 2011 and gave the business to privately held Acosta Inc.
Starbucks accused Kraft of multiple material breaches of contract, including mismanaging the brand. Kraft denied any breach and said that if Starbucks wanted out, it must pay Kraft fair value for the business, which brought in $500 million a year in revenue.
Starbucks will hold a conference call Wednesday morning to discuss the ruling.