Published: Sun, September 02, 2018
Money | By Arnold Ball

Britain's Whitbread to sell Costa Coffee to Coke for $5.1 bln

Britain's Whitbread to sell Costa Coffee to Coke for $5.1 bln

Coca-Cola on Friday said it had agreed to buy global coffee chain Costa from its United Kingdom owner Whitbread for £3.9 billion ($5.1 billion).

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In more recent years, it the company has been focused on building Costa into a multi-channel, worldwide coffee brand.

The purchase from Britain's Whitbread of Costa's nearly 4,000 outlets thrusts the world's biggest soda company into one of the few bright spots in the sluggish packaged food and drinks sector.

"Its global reach should turbo-charge growth in the years to come, and hot drinks are one of the few areas of the wider beverages sector where the soft drinks giant doesn't have a killer brand", he added.

Switzerland's Nestle, for example, has sealed a US$7 billion licensing deal for Starbucks' retail business, while Europe's billionaire Reimann clan has built an empire spanning coffee brands such as Kenco, Douwe Egberts and soft-drink maker Dr Pepper Snapple. JAB Holdings, an investment holding company, has been buying up businesses and brands associated with Peet's, Caribou, Stumptown and Krispy Kreme Doughnuts. "I'd like to welcome the team to Coca-Cola and look forward to working with them". Quincey indicated that one potential early expansion route would be to use Costa's vending operation and expand the company's ready-to-drink products.

Coca-Cola does already have over 500 brands in its stable including Fanta, innocent smoothies and Powerade sports drinks.

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"An excellent deal it may be, but Whitbread investors may miss the caffeine highs Costa serves up", said Nicholas Hyett, equity analyst at London-based stockbrokers Hargreaves Lansdown.

Whitbread acquired Costa in 1995 for £19 million from founders Sergio and Bruno Costa when it had only 39 shops.

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Then Coca-Cola got in touch with what Whitbread said was a "highly compelling" offer. Some will be used to pay down debt and to make a contribution to the pension fund.

The deal is expected to complete in the first half of 2019.

Meanwhile following pressure from activist shareholders, Whitbread announced in April that it would spin off Costa, leaving it to concentrate on its hotel chain Premier Inn.

Whitbread shares soared almost 20% in early morning trade, catapulting it to the top of the FTSE 100.

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