COCA-COLA GAINS TASTE FOR COFFEE WITH £3.9B COSTA DEAL
Deal for UK chain, which operates in 32 countries, is soft drink maker’s biggest push into operating stores
COCA-COLA Co has agreed to buy the United Kingdom chain Costa Coffee for £3.9 billion (RM20.96 billion), stepping into a battle with Starbucks Corp as it gains a global brand in hot drinks.
Whitbread Plc is selling Costa, which operates more than 3,800 locations in 32 countries, rather than go ahead with a plan announced in April to spin it off as an independent company.
Whitbread shares soared the most in 19 years as analysts said the business fetched a “surprisingly high” price.
“Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand,” said Coca-Cola chief executive officer James Quincey in a statement yesterday.
“Costa gives us access to this market through a strong coffee platform.”
Makers of soft drinks are branching out as consumers seek alternatives to sugary sodas.
Earlier this month, Pepsi Co Inc agreed to pay US$3.2 billion (RM13.15 billion) for Soda Stream Ltd, which makes carbonated water dispensers.
This is Coca-Cola’s biggest push into operating stores, just as a series of UK retailers such as BHS go out of business.
Whitbread’s plan to list Costa as a publicly traded firm would have taken up to two years, and the company was under pressure from investors to turn its focus to its Premier Inn hotel operations.
Coca-Cola’s first overture came in June, said Whitbread CEO Alison Brittain. “It’s been a very fast transaction”, she said.
Costa outranks Starbucks in the UK and is expanding in markets such as China. The company also operates a business of 8,000 self-service machines.
Costa was one of the few big coffee chains up for sale after Nestle SA and the Reimann family’s investment company JAB both went on an acquisition spree in the segment.
Coke sells coffee under the Georgia brand in Japan and has some other local products for specific markets.
Whitbread bought Costa in 1995 for £19 million. At the time, it had 39 shops.
The sale would yield a “substantial premium” to the value that would have been created through a spinoff, said Whitbread.
The company would return most of the proceeds to its shareholders, it added.
The price is 16 times this year’s earnings before interest, taxes, depreciation and amortisation.