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Coca-Cola completes acquistion of Costa from Whitbread

Coca-Cola Completes Acquisition of Costa from Whitbread PLC

Friday, 04 January 2019

ATLANTA, USA & DUNSTABLE, England : The Coca-Cola Company today announced that it has completed the acquisition of Costa Limited from Whitbread PLC. The $4.9 billion transaction follows approval from regulatory authorities in the European Union and China. The acquisition was first announced on Aug. 31, 2018.

Costa, which has operations in more than 30 countries, gives Coca-Cola a significant footprint in the global coffee business. Worldwide, the coffee segment is growing 6% annually. Costa has a scalable platform across multiple formats and channels, from the existing Costa Express vending system to opportunities to introduce ready-to-drink products.

“We see great opportunities for value creation through the combination of Costa’s capabilities and Coca-Cola’s marketing expertise and global reach,” said James Quincey, CEO of The Coca-Cola Company. “Our vision is to use the strong Costa platform to expand our portfolio in the growing coffee category.”

“We wish our friends and colleagues at Costa all the very best for their future success,” said Alison Brittain, Whitbread Chief Executive. “Whitbread acquired Costa 23 years ago, when it had only 39 shops. Costa has grown to become a leading, international coffee brand, and Coca-Cola is the right partner to take Costa to the next stage of expansion.”

Original acquisition announcement, 31st August 2018:
Whitbread PLC (“Whitbread” or the “Group”) is pleased to announce that it has entered into an agreement for the sale of Costa Limited (“Costa”), one of the world’s leading coffee brands, to The Coca-Cola Company (“Coca-Cola”), for an enterprise value of £3.9 billion (the “Transaction”).

Transaction highlights

- Sale of Costa for an enterprise value of £3.9 billion, representing a multiple of 16.4x Costa FY18 EBITDA
- Recognises strategic value of Costa’s brand strength, multi-channel presence and international growth potential
- Substantial premium to the value that would have been created through the previously announced demerger given the Coca-Cola system’s global product, distribution and vending platform
- Transaction unanimously agreed by Whitbread Board to be in the best interests of shareholders
- Net cash proceeds expected to be approximately £3.8 billion at completion, after adjusting for estimated transaction costs and separation costs
- A significant majority of net cash proceeds intended to be returned to shareholders

Whitbread will also reduce financial indebtedness and make a contribution to the pension fund, which will both provide headroom for further expansion of Premier Inn in the UK and Germany

The Transaction is conditional upon agreement by Whitbread’s shareholders and various other approvals, including anti-trust approvals, and is expected to complete in the first half of 2019

Whitbread to focus on the attractive structural growth opportunities for its leading hotel business, Premier Inn, in the UK and Germany

Alison Brittain, Whitbread Chief Executive, commented:
“I am delighted that we have agreed the sale of Costa to Coca-Cola for £3.9 billion. 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. The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders. Whitbread will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn.

The sale of Costa to Coca-Cola is another successful landmark in the 276-year history of Whitbread. Whitbread acquired Costa in 1995, for £19 million when it had only 39 shops and successfully grew the business to be the UK’s favourite and largest coffee shop company. In more recent years, we have been focused on building Costa into a leading multi-channel, international coffee brand. This has resulted in this unique strategic opportunity to combine the Costa brand with Coca-Cola’s global scale, product and distribution capabilities. This combination will ensure new product development, continued growth in the UK and more rapid expansion overseas. As a result of this strategic sale our teams, pensioners, suppliers, shareholders and other stakeholders will all have the opportunity to share in the benefits.

Premier Inn, the UK’s leading hotel business, will continue to develop its highly successful and unique business model, with even greater focus and financial investment. Premier Inn will continue to take advantage of the considerable structural growth opportunities in the UK and accelerate its network expansion in Germany. This will deliver strong return on capital and significant value to shareholders over the long term.”

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

©2019 Be Central Bedfordshire

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