Coca-Cola pours £3.9bn into Costa Coffee acquisition

Coca-Cola pours £3.9bn into Costa Coffee acquisition

Coca-Cola pours £3.9bn into Costa Coffee acquisition

Earlier in August, Coca-Cola's arch-rival PepsiCo struck a deal to buy Israeli company SodaStream for $3.2 billion - in a pitch to consumers concerned about mounting waste from soda cans and plastics in landfills worldwide.

Brittain, who has led Costa-owner Whitbread (WTB.L) since December 2015, didn't know James Quincey before the Microsoft CEO Summit in Seattle.

After missing out on the heady growth phase of coffee shops, Coca-Cola is entering when the market in countries like the United Kingdom and the U.S.is crowded. The company also operates a business of 8 000 self-service machines.

Speaking to the BBC's Today programme, Whitbread chief executive Alison Brittain said she expected Coca-Cola to put its new asset to work straight away by creating a new line in "ready to drink cold brew coffees".

Adding Costa to its array of brands will give Coca-Cola a presence in one of the few beverage markets it now doesn't contend in and could potentially provide stiff competition to the likes of Starbuck's.

Organic revenue, or sales from its core beverage business, rose 5 percent in the quarter, with Diet Coke, Coke Zero and sparkling water contributing the most.

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. But it seems Coca-Cola swung in with an offer that was much more lucrative for Whitbread: the deal is worth £3.9 billion.

Whitbread had meant to spin off the chain as a separate firm, but said a straight sale was more profitable.

"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".

Whitbread acquired Costa in 1995 for 19 million pounds when it had only 39 shops.

Without being specific about expansion plans, Quincey said in a video posted on Coca-Cola's website that the company would "over time" look to take Costa "to more people in more places".

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

"Coca-Cola are one of the few companies in the world that could justify the valuation", said Nicholas Hyett, equity analyst at Hargreaves Lansdown. Whitbread will now focus on its Premier Inn business, which it operates in the United Kingdom and Ireland.

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