Mubadala buys into Luckin Coffee in a USD 1 bn transaction

Abu Dhabi sovereign wealth fund Mubadala will take a minority stake in Luckin Coffee, China’s biggest coffeehouse chain by store count, alongside Centurium Capital — Luckin Coffee's controlling shareholder — in a transaction worth roughly USD 1 bn, it said in a statement yesterday. Mubadala didn't disclose how much of that USD 1 bn is its own check.

The investment is the latest in a series of investments in China, which have reached around USD 20 bn across 100-plus investments since it entered the market in 2015. The fund has in recent years been chasing bigger minority, buyout, and late-stage positions in Chinese firms, counting Shein and Dalian Wanda's mall business among its recent investments.

Luckin itself isn't a clean story…: It was delisted from Nasdaq in 2020 after disclosing employees had fabricated roughly USD 300 mn in sales, triggering a US bankruptcy filing and an SEC settlement. Centurium backed the turnaround, and Luckin has since overtaken Starbucks as China's largest coffee chain by sales. It runs more than 36k stores globally against Starbucks' roughly 40k, according to the Financial Times.

… which is likely why Mubadala will keep a close watch with a board seat: The FT says Mubadala will nominate a director to Luckin's board — the kind of governance seat Mubadala has been pushing for more often as it writes bigger checks.

What’s interesting is where Mubadala is investing its money in China. It’s focused squarely on the retail and consumption front, staying away from sectors like tech amid heightened US scrutiny, as Abu Dhabi works to preserve its own access to advanced American technology. Mubadala-backed AI giant G42 had to divest all of its Chinese holdings earlier to persuade the US to give it chip export approvals for chips G42 needed for its AI buildout at home.

What's next: The transaction still needs to clear customary closing conditions, with no completion date given.