Whitbread soars as investors cheer £4bn Costa sale
Now firm will expand Premier Inn hotel chain
WhITBreaD shares soared as investors welcomed plans to sell Costa Coffee to Coca-Cola for £3.9bn.
In a move that took the City by surprise, Whitbread chief executive alison Brittain offloaded the coffee chain for £1bn more than expected.
The 53-year- old will now focus on expanding the firm’s Premier Inn hotel chain – particularly in Germany.
The move follows pressure from investors to break-up Whitbread, which also owns the Brewers Fayre and Beefeater restaurant chains.
Former reckitt Benckiser chief executive Bart Becht, 62, was also interested in making a swoop for Costa. The Dutch businessman is the chairman of familyowned JaB holdings, which was founded by Johann Benckiser and Ludwig reimann who married into the Benckiser family and owns Dr Pepper and Pret a Manger.
Whitbread shares rose 14.3pc, or 576p, to 4596p – the highest level for three years.
Brittain said: ‘This is a cracking deal. and it’s not just a cracking deal for Whitbread and its shareholders but it’s also a fantastic deal for Premier Inn because it’s going to fuel additional growth.
‘Coca-Cola has this massive distribution globally that’s available now to Costa and they will also produce new products like ready to drink cold coffee that will sit in the fridges of all the fridges of supermarkets in the world.
‘Costa is going for global domination,’ she said.
The deal will see Coca-Cola enter the coffee market for the first time, taking on Costa’s almost 4,000 cafes across 32 countries and 8,000 coffee express machines.
It sets the scene for a so-called ‘latte war’ as Costa goes head to head with Starbucks, the world’s biggest coffee brand.
Costa will have the spending power to develop chilled readyto-drink coffees that will be available in supermarkets alongside similar Starbucks products and from Coca-Cola’s 10m vending machines around the world. Whitbread shareholders are expected to reap most of the rewards from the deal with analysts predicting investors could pocket between £2.5bn and £3bn.
The rest of the proceeds will be used to fund Whitbread’s £350m pension deficit and pay some of its £833m debts. Costa’s pensioners will remain part of Whitbread’s pension scheme until the deal is completed when it will be transferred to Coca-Cola’s. Whitbread will focus on growing its hotels business with a particular eye on expanding Premier Inn further in Germany.
Whitbread has been under pressure from activist investors elliott and Sachem head, which had called for Costa to be spun off as a separate business to deliver more value to shareholders.
The firm had planned to demerge Costa by 2020 but Brittain said Coca-Cola came forward in June after taking an interest in the coffee chain for some months.
Costa will remain a separate brand under the Coca- Cola empire, much like smoothie maker Innocent Drinks, which sold a 32pc stake for £100m to Coke in 2013.
James Quincey, chief executive of Coca-Cola, said it was more likely Costa would go head to head with Starbucks in europe and asia than in the US.
Brittain said: ‘everywhere I go I’m probably going to see a Costa drink and I’m going to smile wryly and think I had a hand in that. I am enormously fond of the brand and wish it every success.’