Houghton Regis based firm Whitbread, sells Costa Coffee for £3.9b

Houghton Regis based firm Whitbread, sells Costa Coffee for £3.9b

Houghton Regis based firm Whitbread, sells Costa Coffee for £3.9b

The company has agreed to buy coffee chain Costa Coffee from United Kingdom drinks and hotels group Whitbread for £3.9 billion ($5.1 billion). Costa's maroon shop front is now one of the most ubiquitous sights on British high streets, with 2,422 outlets in the United Kingdom and a further 1,399 in global markets, operated as franchises, joint ventures and wholesale outlets.

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.

"Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand".

Earlier this year, Nestle and Starbucks agreed a $7.2 billion global coffee alliance, which will see Nestle market, sell and distribute Starbucks products outside its stores worldwide. JAB Holdings, an investment holding company, has been buying up businesses and brands associated with Peet's, Caribou, Stumptown and Krispy Kreme Doughnuts. 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.

"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. In 2017, it generated operating income of $9.7 billion on revenues of $35.4 billion.

Whitbread had been in the process of demerging Costa from its hotel group Premier Inn, and the sale marks the latest transformation in a business that was established in 1742 as a brewer and which has also owned sports clubs and restaurants.

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Whitbread bought Costa, which is now the UK's biggest coffee chain, for just £19m in 1995.

The deal still needs to get approval from shareholders and regulators, and is expected to be completed in the first half of 2019, the companies said.

"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".

Whitbread's share price soared 14 per cent. Coca-Cola shares were little changed.

She said the money from the sale would be used to expand the Premier Inn chain, return some cash to shareholders, pay down debt and boost the pension fund.

Whitbread had meant to spin off the chain as a separate firm, but said a straight sale was more profitable.

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