Coca-Cola Pays Jittery Price for U.K. Coffee Chain

Coca-Cola Pays Jittery Price for U.K. Coffee Chain

Leisure group Whitbread (Frankfurt: WHF4.F - news) has agreed to sell the UK's biggest coffee chain Costa to Coca-Cola for £3.9bn.

A stalwart of Britain's corporate landscape faces the threat of possible extinction as the City bets that Whitbread's £3.9 billion sale of Costa Coffee to the Coca-Cola Company could spark bid interest in its Premier Inn business.

Trish Caddy, UK food service analyst at Mintel, agrees that should be a key area of focus: "In an increasingly competitive marketplace, the acquisition of Costa Coffee would extend Coca-Cola's presence in the coffee and restaurant space". Less than two weeks earlier, arch-rival PepsiCo Inc. agreed to buy SodaStream Ltd., a maker of carbonated-water dispensers, for $3.2 billion.

Costa Coffee has sought worldwide expansion in recent years, particularly in China, as it looked to offset declining sales on British high streets. The chain is now the most popular coffee shop in the United Kingdom with 48% of consumers buying a hot drink from Costa in the three months to October 2017, with consumers aged 18 to 24 most likely to have bought a hot drink from Costa.

India Opportunity for Coca-Cola "RJ Corp could exit the franchise deal with Costa Coffee in India, which means Costa Coffee will have to make an offer in agreement with both entities".

The coffee market itself is hot at the moment.

Costa Coffee, which has been in India for almost a decade and a half, has around 100 stores, run by Ravi Jaipuria's Devyani International under a franchisee agreement with the previous owner of Costa (Whitbread).

More news: Hurricane season is back with a possible storm 'as strong as Ophelia'

Whitbread said it would return cash to shareholders, cut debt and contribute to its pension fund with proceeds from the deal and further expand its hotel chain Premier Inn in Britain and Germany.

For Coke, the Costa deal may have resulted from past lessons learned.

Whitbread said in April that it would divest Costa, after pressure from activist investors who said the business should be separate from its hotel operations.

Before Thursday's announcement, Whitbread had a market capitalisation of £7.3bn, with the company estimating that Costa represented £2.3bn of that value. JAB Holdings, an investment holding company, has been buying up businesses and brands associated with Peet's, Caribou, Stumptown and Krispy Kreme Doughnuts. And another of JAB's coffee brands, Keurig, merged with Dr Pepper Snapple in January.

Coke has dabbled in coffee before, with an unsuccessful attempt at selling java-flavoured Coca-Cola Blak.

"Coffee culture is also evolving rapidly in wider Asia and is one of the main reasons that Nestlé recently bought the rights to sell a range of Starbucks brands, added Forsyth".

Rothschild advised Coke on the deal while Goldman Sachs, Morgan Stanley and Deutsche Bank advised Whitbread.

Related Articles

  • Cleveland adds third baseman Josh Donaldson

    Cleveland adds third baseman Josh Donaldson

    Josh Donaldson has been informed that he's been traded to the Indians , Jeff Passan of Yahoo Sports reported Friday night. Donaldson has recently been rehabbing his left calf injury in the minors and hasn't played in the majors since May 28.
    Serena Williams returns in style at US Open

    Serena Williams returns in style at US Open

    Williams needed an hour and 10 minutes to get past Linette, growing into the first-round clash and finishing with 23 winners. The 36-year-old downed 68th-ranked Magda Linette of Poland 6-4 6-0 in her first home slam since becoming a mother.
    Apple's Next Big iPhone Event Is Slated For September

    Apple's Next Big iPhone Event Is Slated For September

    As rumored earlier, we will probably see the entire new iPhone lineup, or precisely, a total of three iPhone models, if not more. The new Apple Watches might also have improved heart rate detection.
  • Judge: Government can end housing for Puerto Rican evacuees

    Judge: Government can end housing for Puerto Rican evacuees

    Irma knocked out Puerto Rico's entire power grid. "Do you know what it's like to see your mother run out of oxygen?" she said. They say the initial low counts came partly because physicians lacked training on how to certify deaths after a disaster.
    Arsenal to face Brentford in Carabao Cup - Worst possible draw?

    Arsenal to face Brentford in Carabao Cup - Worst possible draw?

    Spurs said in a statement: "We have applied to the EFL board for special dispensation to play this tie at Stadium MK". Arsenal , who were beaten by City in last year's final, face fellow London club Brentford .
    I’m

    I’m "one of the greatest" managers - Mourinho

    The 55-year-old added that finishing runners-up in the league last season was one of his "greatest achievements". I believe when they get to this level in the Premier League it is because they are top, top managers.
  • California sends net neutrality bill to governor's desk

    California sends net neutrality bill to governor's desk

    The Electronic Frontier Foundation , an advocacy group that supports online privacy, called it "a victory that can be replicated". Brown has not said whether he'll sign the bill, which would likely draw a lawsuit from the industry.
    Rockets' Ryan Anderson dealt to Suns

    Rockets' Ryan Anderson dealt to Suns

    Phoenix has until July 10, 2019, to decide on picking up Anderson's $21.3 million deal or waiving him for $15.6 million . According to Wojnarowski, the Suns are "hopeful" that Harrison can take on a bigger role this year.

    Air Leak on the International Space Station as Crew Sleeps

    Controllers at NASA said their readings also showed that the pressure had stabilized, and they continued to monitor the situation. Mission controllers were first alerted to the issue by air pressure sensors on board the station.
  • 'ER' Actress Vanessa Marquez Shot and Killed by Police

    'ER' Actress Vanessa Marquez Shot and Killed by Police

    Clooney released a statement at the time, which read: "I had no idea Vanessa was blacklisted". 'I was an actor and only an actor. On the television side of things, Marquez appeared on episodes of Melrose Place , Malcolm & Eddie , and Seinfeld .
    Paul Pogba would be welcome at Barcelona, says Pique

    Paul Pogba would be welcome at Barcelona, says Pique

    After returning from Juventus for a world record fee, the Frenchman has had mixed form at Manchester United . The teams split their Premier League meetings last season, with the home team winning both times .
    Chidambaram expresses scepticism over GDP growth prospects in coming year

    Chidambaram expresses scepticism over GDP growth prospects in coming year

    The agriculture sector grew at 5.3% compared to 3% last year, while construction also saw a healthy bump (8.7% compared to 1.8% last year).