Coca-Cola Co. agreed to buy United Kingdom coffee-shop leader Costa for 3.9 billion pounds ($5.1 billion) in its biggest acquisition in eight years, pushing the soda pioneer into the fiercely competitive java market.
Shares in Whitbread Plc have surged nearly 20 percent on news of the deal on Friday, adding more than £1 billion ($1.3 billion) to the group's stock market value, as financial analysts said the price was markedly higher than expected.
It's Coca-Cola's latest move to diversify as health-conscious consumers, at least in America, move away from traditional soda.
Coca-Cola CEO James Quincey said that the acquisition is more about gaining access to Costa's many products - like its coffee vending machines, on-the-go outlets, ready-to-drink iced coffee and beans from its roastery - than it is about owning restaurants. It will give Coca-Cola "a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion", Coca-Cola said in a statement.
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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.
Whitbread added that it intends to return a significant majority of net cash proceeds to shareholders.
"We had always determined at the start, when we announced the demerger, that we would not be interested in a sale to financial companies but we would remain open to a strategic buyer such as Coca-Cola who could bring additional value for our shareholders, because of the synergies that they have".
The deal to buy Costa will cost Coca-Cola $5.1 billion. Since then, Costa has grown from just 39 shops to become the biggest coffee firm in Britain.
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JAB added the United Kingdom -based food-and-coffee chain Pret A Manger in a $2 billion deal earlier this year, following its past acquisitions of high-end coffee brands Peet's and Stumptown. The Costa purchase is Coca-Cola's biggest push into operating stores, just as weak consumption in the United Kingdom leads a series of retailers such as BHS out of business.
Hyett said Costa will get "lots of care and attention" from Coca-Cola.
The move will also help it to expand its Premier Inn chain in the United Kingdom and Germany.
Proceeds of the deal will be used to pay down debt and boost the pension fund. Coca-Cola shares were little changed.
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