Coca-Cola is reportedly in talks to acquire the Costa coffee chain from Whitbread for £3.9 billion ($5.07 billion). Apparently, the deal would help Coca-Cola expand its product range into the coffee segment, a product which it does not boast of in its portfolio and is estimated to be completed by the first half of 2019.
Sources familiar with the matter stated that Whitbread was earlier planning to spin off the Costa Coffee business, which it had acquired in 1995 for just £19 million. The company would supposedly focus on expanding its other Premier Inn hotel brand in the U.K. and Germany using the money raised from this deal.
Whitbread’s chief executive, Alison Brittain, confirmed that after the sale of Costa coffee, investments would be undertaken to expand the Premier Inn chain, some cash would be returned to shareholders, debt would be paid down, and the pension fund will also be boosted. She further said the price paid by Coca-Cola is much higher than what the Whitbread would have earned by demerging Costa as a stand-alone entity on the stock market.
Brittain believes that Coca-Cola could use Costa for offering cold brew coffees that are ready to drink, and the presence of Costa would be seen in all places that Coke is available today, such as hotels, pubs, cafes and vending machines.
According to industry reports, Whitbread had been put under pressure to spin off Costa by the hedge fund Elliot Advisors, after it became the largest shareholder of the company. It had also created and presented a demerger plan for coffee chain business.
For the record, there are over 2,400 Costa coffee outlets in the U.K., and additionally around 1,400 coffee shops are established in 31 other countries. Also, Costa Express has about 8,237 vending machines operating globally. Whitbread owns renowned brands like Marriott, TGI Fridays and Pizza Hut as well as Beefeater and Brewers Fayre restaurants.