The key point seems to be this (from a SBUX presentation):...
Notice the focus on the store, not product. SBUX may in fact have been more focused on the distribution/locations of TEA. Regardless of the underlying product, SBUX can simply replace the products on the shelves - after all, SBUX is not known for having the best coffee, but rather the easier place to get consistently decent coffee nearby.
This presentation may have well been the turning point, when Howard Schultz, the CEO publicly affirmed the acquisition:
As a result, all the arbitrageurs got up to a 100% annualized return when the deal spread widened after Glaucus' reports.
This may indeed highlight the danger of shorting deals in general - the "truth" (e.g. TEA's pesticides) is less important than the actors/motivations involved.
(credit to http://www.blogohblog.com/a-recap/ for picture)
