Coca-Cola buys Costa coffee chain for $5.1 billion

Coca-Cola buys Costa coffee chain for $5.1 billion

Coca-Cola buys Costa coffee chain for $5.1 billion

This laid the groundwork for Coca-Cola's acquisition.

Costa has almost 4,000 stores across 32 countries.

"Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand".

In more recent years, it the company has been focused on building Costa into a multi-channel, global coffee brand. JAB, the Luxembourg-based holding company that owns brands like Krispy Kreme and Peet's Coffee, bought United Kingdom sandwich and coffee chain Pret A Manger in May.

Earlier this year, Nestle and Starbucks agreed a $7.2 billion global coffee alliance, which will see Nestle market, sell and distribute Starbucks products outside its stores worldwide.

"An excellent deal it may be, but Whitbread investors may miss the caffeine highs Costa serves up", said Nicholas Hyett, equity analyst at London-based stockbrokers Hargreaves Lansdown.

Costa, which doesn't now have a presence in North or South America, was the third-largest coffee shop chain globally in 2017, according to market research provider Euromonitor International, just behind McDonald's McCafe outlets but well behind Starbucks.

"I would like to say a huge thank you to our customers and to everyone in the Costa team who have helped us build the business to this position, and I look forward to the next exciting chapter in Costa's vision of "Inspiring the World to Love Great Coffee", Paul added.

Coca-Cola does already have over 500 brands in its stable including Fanta, innocent smoothies and Powerade sports drinks.

Premier Inn has 785 hotels in the United Kingdom and a sprinkling of others in Germany and the Middle East.

It acquired the chain in 1995, for 19 million pounds when it had only 39 shops.

The deal still needs to get approval from shareholders and regulators, and is expected to be completed in the first half of 2019, the companies said.

Whitbread will use a "significant majority" of the net cash proceeds around 3.8 billion pounds after taking into account such things as transaction costs returning cash to shareholders.

Whitbread shares rose more than 17% in early Friday trading.

Meanwhile following pressure from activist shareholders, Whitbread announced in April that it would spin off Costa, leaving it to concentrate on its hotel chain Premier Inn.

"Whitbread will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn".

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