Coca-Cola pours £3.9bn into Costa Coffee acquisition

Coca-Cola CEO'We try to be more than a soda company

Coca-Cola CEO'We try to be more than a soda company

Whitbread bought Costa in 1995 from founders Sergio and Bruno Costa and presently runs about 2,400 stores in the United Kingdom and some 1,400 around the world.

Coca-Cola hopes to close the deal in the first half of next year, subject to shareholder and regulatory approvals.

Coca-Cola Co has agreed to buy the United Kingdom chain Costa Coffee for £3.9 billion ($7 billion), stepping into a battle with Nestle and Starbucks Corp as it gains a global brand in hot drinks.

The cola giant announced today that it has acquired global coffee brand Costa in a $5.1 billion deal.

Costa is Britain's biggest coffee company, with over 2,400 coffee shops in the United Kingdom and another 1,400 in more than 30 countries, including around 460 in China, its second-biggest market.

The research firm Mintel estimated that the global coffee shops market was worth £127.3bn ($165bn) in 2017, while another £43.2bn ($56bn) worth was sold in shops - whether as beans or the increasingly popular pods used by consumers playing barista at home.

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

Costa has almost 4,000 stores across 32 countries.

As well as being the largest United Kingdom coffee chain, Costa is also the world's second largest. Earlier this month, PepsiCo Inc. agreed to pay $3.2 billion for SodaStream Ltd., which makes carbonated-water dispensers. Quincey indicated that one potential early expansion route would be to use Costa's vending operation and expand the company's ready-to-drink products. It has invested heavily in Costa's expansion overseas recently, but had been looking to siphon off the business to generate funds for the expansion and for its other business, the budget hotel chain Premier Inn.

Chief executive Alison Brittain said Whitbread would now focus on its Premier Inn business in the United Kingdom and Germany.

Nicholas Hyett, an equity analyst at London-based stockbrokers Hargreaves Lansdown, said Costa will get "lots of care and attention" from Coca-Cola. Whitbread revelaed plans to spin off the business in April, but has now decided a sale would be a better deal for shareholders, with the price paid by Coca-Cola higher than the likely returns from spinning it off. Coca-Cola shares were little changed.

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