Coca-Cola to purchase Costa Coffee for £3.9 billion

Whitbread has entered into agreement with the Coca-Cola Company to sell the Costa Coffee chain for £3.9 billion

The deal has been unanimously agreed by the Whitbread board, but still needs to be approved by shareholders, and sanctioned by anti-trust authorities. If successful, the sale is expected to be completed during the first half of 2019.

Whitbread announced in April that they planned to demerge Costa under a separate listed entity, a process expected to take two years to conclude. This followed the release of their 2018 financial year performance, with sales reported up 6.1% to £3,295m, and profit before tax up 6.4% to £548m. Investors in the company appeared to welcome the deal, with shares in the company increasing 18% on the stock exchange following news of the proposal.

Costa was originally founded by brothers Sergio and Bruno Costa, with the first store opening in 1976. Following the sale to Whitbread in 1995 for £19 million, the chain has grown exponentially and is now the UK’s largest branded coffee shop chain with over 24,000 outlets. The brand also operates a further 7,000 self-serve Costa Express machines, predominantly located in petrol stations convenience stores.

Alison Brittain, Whitbread Chief Executive commented “I am delighted that we have agreed the sale of Costa to Coca-Cola for £3.9 billion. 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. The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders."
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