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Coca-Cola digs into coffee with $7b Costa purchase

31 August, 2018, 17:58 | Author: Melinda Barton
  • The current owner Whitbread announced a plan to spin off Costa earlier this year

"Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand", said James Quincey, Coca-Cola President & CEO.

Because Coca-Cola expects the transaction to close in the first half of 2019, there is no change to 2018 guidance.

SodaStream makes machines that carbonate home tap water.

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 acquisition sprees in the segment.

Whitbread has owned Costa since 1995, when it bought it for just £19m.

Whitbread's share price soared 17 per cent in early afternoon trading in London.

While Costa does not compete in the USA market, it is the U.K.'s leading coffee chain and operates several hundred outlets in China. "Costa has strengths in many countries and in many key distribution channels of the coffee business". He said: "Costa is a platform with a great supply chain in coffee, a world-class roastery, a strong retail presence and a vending system".

The leisure group, which owns the Premier Inn hotel business, had been under pressure from shareholders to demerge and list the coffee chain as a separate company.

However, the proposed sale has to get the approval of Whithead's shareholders, as well as permission from anti-trust watchdogs, the firm said.

"(This is) certainly a big coup for Whitbread that they managed to sell Costa at a valuation much above what anyone would have expected", Bernstein analyst Richard Clarke said. The spinoff would have taken as long as two years, the company had said.

It has recently expanded into China after growth in Britain became harder to find in a market bursting with chains such as Starbucks, Caffe Nero and thousands of independent outlets. "A significant majority" of the proceeds will be given to the shareholders, the firm added.

Nestle joined the trend of coffee giants taking aim at smaller niche producers, buying Blue Bottle Coffee and Chameleon Cold Brew.

Coca-Cola's purchase adds to its Georgia coffee brand in Japan and the USA group's coffee products in other countries.

Bankers from Rothschild advised Coke, while Whitbread used Goldman Sachs, Morgan Stanley and Deutsche Bank.



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