Leisure group Whitbread has agreed to sell the UK’s biggest coffee chain Costa to Coca-Cola for £3.9bn
Whitbread acquired Costa in 1995 for £19m when it had 39 shops and built it into the UK’s favourite coffee shop. It now has more than 2,400 outlets and is embarking on overseas expansion.
The leisure group, which owns the Premier Inn hotel business, had been under pressure from shareholders to demerge and list the coffee chain as a separate company.
Chief executive Alison Brittain said: “This transaction is great news for shareholders as it recognises the strategic value we have developed in the Costa brand and its international growth potential and accelerates the realisation of value for shareholders in cash.”
Activist investor Elliott Advisors became Whitbread’s largest shareholder in April and called for a demerger on the grounds it could potentially value the separated firms at a combined £10bn as opposed to the current £7.7bn within the Whitbread stable.
Whitbread said it will use the money to reduce its debt, increase its contribution to the pension fund and return a “significant majority” to shareholders. The move will also help it to expand its Premier Inn chain in the UK and Germany.
The deal helps Coca-Cola to move away from fizzy drinks towards more healthier options. Costa also has more than 1,400 stores in more than 30 international markets.
James Quincey, Coca-Cola’s chief executive, said: “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.
Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand.
Costa gives us access to this market through a strong coffee platform.”