Paying about 1 billion pounds more than some analysts had expected, Coke will use its distribution network to supercharge Costa's expansion as it chases current coffee chain market leader Starbucks (SBUX.O) and its nearly 29,000 stores across 77 markets.
Whitbread agreed to sell Costa at a price that's 16 times this year's earnings before interest, taxes, depreciation and amortisation, the companies said in a statement Friday.
Coca-Cola are known for their soft drinks but they now have no coffee products in their portfolio, so Costa is an appealing prospect to expand their range. "Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand". Since then, Costa has grown from just 39 shops to become the biggest coffee firm in Britain.
She said the money from the sale would be used to expand the Premier Inn chain, return some cash to shareholders, pay down debt and boost the pension fund.
The deal represents a big return to Whitbread, which bought Costa in 1995 for 19 million pounds.
Coca-Cola is to buy the Costa coffee chain from owner Whitbread in a deal worth £3.9bn.
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"You could see Costa absolutely everywhere, in vending machines, hotels, restaurants, pubs, cafes - in all the places you see Coke today", she said.
"Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide", says Coca-Cola President and CEO James Quincey.
"This is a bitter sweet moment for Whitbread investors", noted Nicholas Hyett, equity analyst at Hargreaves Lansdown. Costa's maroon shop front is now one of the most ubiquitous sights on British high streets, with 2,422 outlets in the United Kingdom and a further 1,399 in global markets, operated as franchises, joint ventures and wholesale outlets.
"However, the growth story needs to be looked at because Whitbread has chose to change tack, shifting away from a demerger that it said would let the coffee and hotel chains grow more rapidly in favour of a quick sale".
Costa is owned by Whitbread, the British multinational hospitality company.
Rothschild advised Coke on the deal while Goldman Sachs, Morgan Stanley and Deutsche Bank advised Whitbread.