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Coca-Cola buys Costa Coffee for £3.9 billion

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costa coffee
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  • US beverage giant Coca-Cola will buy British coffee
    shop chain Costa in a surprise acquisition.
  • Costa, which is currently owned by Whitbread, is being
    sold for £3.9 billion ($5.1 billion).
  • Coca-Cola currently has no presence in the coffee
    market, and wants to use the deal to expand into the
    space.
  • Shares in Whitbread jump almost 20% at the open on the
    news.

Coca-Cola has announced a surprise move to buy Costa Coffee, one
of the UK’s largest cafe chains, from current owners Whitbread
for £3.9 billion ($5.1 billion).

Whitbread, which also owns budget hotel chain Premier Inn, said
that its board had unanimously approved the deal, and
that it expects the sale to be completed by the first half of
2019.

“This transaction is great news for shareholders as it recognises
the strategic value we have developed in the Costa brand and its
international growth potential and accelerates the realisation of
value for shareholders in cash,” Whitbread’s chief
executive Alison Brittain
said in a statement released to the stock market on Friday
morning.

The £3.9 billion figure put on the deal represents a
multiple of more than 16 times Costa’s expected full year
earnings in 2018.

Shares in Whitbread surged at the open on Friday as a
result of the deal, climbing almost 20%, as the chart below
shows:


Whitbread share chart costa mergerMarkets Insider

Whitbread had not hidden its plans to spin out the Costa
brand, but the sale to Coca-Cola has come as something of a
surprise to many in the market, given that Coca-Cola currently
has no presence in the coffee market.

One of the main drivers of the deal, Brittain said, is that “they
[Coca-Cola] want the coffee product, they have no coffee in their
range.” Brittain went on to say that Coca-Cola plans to sell
Costa branded “ready to drink, cold brew coffees” in
places like vending machines and convenience stores.

“Costa gives Coca-Cola new capabilities and expertise in
coffee, and our system can create opportunities to grow the Costa
brand worldwide,” Coca-Cola CEO James Quincey said in a
statement.

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

“Costa gives us access to this market through a strong
coffee platform. I’d like to welcome the team to Coca-Cola and
look forward to working with them.”

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