Home / International/ Coca-Cola takes big step into coffee with $ 5.1 billion Costa deal

Coca-Cola takes big step into coffee with $ 5.1 billion Costa deal


Comments / {{hitsCtrl.values.hits}} Views / Monday, 3 September 2018 00:00


REUTERS: Coca-Cola Co. has agreed to buy the world’s second largest coffee chain Costa from Britain’s Whitbread PLC for $ 5.1 billion including debt, opening a new front in its push into healthier markets.

The two companies said on Friday that Coke, one of the biggest soft drinks groups in the world, would buy Costa’s almost 4,000 outlets across markets such as Britain, Europe and China after Whitbread’s board unanimously backed the deal.

Whitbread shares jumped 19% in early trading, with dealers saying the purchase price was more than GBP 700 million ($ 911 million), higher than expected.

The purchase of the biggest coffee chain behind Starbucks adds to Coca-Cola’s drive to diversify away from fizzy drinks and expand its options for increasingly health-conscious consumers after countries started introducing sugar taxes.

“Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand,” Coca-Cola CEO James Quincey said. “Costa gives us access to this market with a strong coffee platform.”

Established in 1742 as a brewer, Whitbread had been in the process of demerging Costa from its Premier Inn hotel chain after it came under pressure from hedge funds. The deal marks the latest transformation of a group that has held assets across the leisure, food and drink sectors.Whitbread acquired Costa in 1995 for GBP 19 million when it had only 39 shops. It is now present on most British high streets, with 2,422 outlets across the country and a further 1,399 in international markets, operated as franchises, joint ventures and wholesale outlets.

It has recently expanded into China after growth in Britain became harder to find in a market bursting with chains such as Starbucks, Caffe Nero and thousands of independent outlets.

Whitbread said it would cut debt and contribute to its pension fund with proceeds from the deal and further expand its hotel chain Premier Inn in Britain and Germany.

“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”, Chief Executive Alison Brittain said.

Rothschild advised Coke on the deal.

 


Share This Article


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

STEAMing STEM – Moving from horoscopes to telescopes!

Thursday, 20 September 2018

Walking into an inventors’ exhibition should give one an experience similar to an immersion into the future. The world change with inventions and inventors lead the change. The creativity displayed is an indicator of the creativity of the society f


There is smoke in the eyes of those who do not want to see!

Thursday, 20 September 2018

Shyamon Jayasinghe, a former citizen of Sri Lanka, now living in Victoria, Australia, writing to Daily FT in a Guest Column article has given an old college try at the President of Sri Lanka by announcing about a cloaked portentous writing on the wal


Modi celebrates birthday whilst making India strong – Lesson for SL

Thursday, 20 September 2018

The Indian Prime Minister celebrated his birthday earlier this week in the backdrop of India growing at a blistering performance of 7.1%. The January-March quarter saw the highest GDP growth in the last seven quarters with India becoming the sixth la


Maximum Residue Level: Dilemma of agricultural product exporters in Sri Lanka

Wednesday, 19 September 2018

Due to increased emphasis on consumer health, majority of developed countries such as EU, Japan and the US insist on MRL testing of food items which has to be done by the exporter. The Codex Alimentarius Commission which is an inter-governmental bod


Columnists More