Funds force Costa sell-off
Whitbread splits from coffee giant
US hedge funds forced Whitbread to yesterday announce plans to sell coffee chain Costa.
American wheelerdealers hope to make a packet after Whitbread bowed to pressure to break the 276-year-old company in two. Costa will become a separate company listed on the stock market within two years, worth a possible £3billion. The rest of Whitbread will consist of hotel chain Premier Inn and restaurants. The firm’s beer-making arm – on which it was founded – was sold to Belgian giant Interbrew in 2000. Hedge fund Elliott Advisors and Sachem Head have called for the split since building a big stake in the firm. Whitbread boss Alison Brittain insisted its plan for some time was to hive off Costa by 2020. But she admitted “noise” around investor pressure triggered yesterday’s announcement to “create clarity”. Elliott said it was “pleased” about the demerger but wants it all done “within six months”.
Yet Brittain insisted: “I can’t recall a demerger that has taken less than 12 months.”
Whitbread reckons splitting the business will further boost Costa and Premier Inn’s international expansion.
The company bought Costa in 1995 and it now has 2,400 stores worldwide.
Whitbread yesterday announced full-year profits rose 6.4%.
Just under £500million came its near 800 Premier Inns and 715 restaurants, including Beefeater and Brewers Fayre, where sales rose 5.2% to £2bn.
Profits at Costa fell 5.5% to £123m, although sales were up 7.5% at £1.3bn.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Coffee shops and hotel rooms don’t make natural bedfellows, so splitting off Costa Coffee from Premier Inn makes sense.”