Coca-Cola could be set to enhance Costa Coffee's distribution capabilities after it decided to buy out the coffee chain for £3.9bn from its owners Whitbread.
The sale of Costa to Coca-Cola is another successful landmark in the 276-year history of Whitbread. Whitbread acquired Costa in 1995, for £19 million when it had only 39 shops and successfully grew the business to be the UK’s favourite and largest coffee shop company. In more recent years, we have been focused on building Costa into a leading multi-channel, international coffee brand. This has resulted in this unique strategic opportunity to combine the Costa brand with Coca-Cola’s global scale, product and distribution capabilities. This combination will ensure new product development, continued growth in the UK and more rapid expansion overseas. As a result of this strategic sale our teams, pensioners, suppliers, shareholders and other stakeholders will all have the opportunity to share in the benefits.
Premier Inn, the UK’s leading hotel business, will continue to develop its highly successful and unique business model, with even greater focus and financial investment. Premier Inn will continue to take advantage of the considerable structural growth opportunities in the UK and accelerate its network expansion in Germany. This will deliver strong return on capital and significant value to shareholders over the long term.”
James Quincey, Coca-Cola President & CEO, commented: “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide. Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market through a strong coffee platform. I’d like to welcome the team to Coca-Cola and look forward to working with them.”
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 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 will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn.