Houghton Regis based firm Whitbread, sells Costa Coffee for £3.9b

Houghton Regis based firm Whitbread, sells Costa Coffee for £3.9b

Houghton Regis based firm Whitbread, sells Costa Coffee for £3.9b

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

While Coke touts the acquisition as a move into the market for hot beverages, it may be the company's play to gain a toehold in the European market, where it starts in a virtual tie with Starbucks Corp. JAB Holdings, an investment holding company, has been buying up businesses and brands associated with Peet's, Caribou, Stumptown and Krispy Kreme Doughnuts.

Switzerland's Nestle, for example, has sealed a US$7 billion licensing deal for Starbucks' retail business, while Europe's billionaire Reimann clan has built an empire spanning coffee brands such as Kenco, Douwe Egberts and soft-drink maker Dr Pepper Snapple. Coca-Cola owns the Georgia and Gold Peak coffee brands, but the purchase of Costa will give it a much broader presence.

Coca-cola's plan to buy Costa is coming amid concerns over health risks associated to the consumption of carbonated drinks which has affected the demand of the company's products in the United States and some other markets around the world.

The coffee retailer, the biggest in the United Kingdom, has eight stores across the Fylde coast, as well as dozens of express vending machines in retail shops.

"An excellent deal it may be, but Whitbread investors may miss the caffeine highs Costa serves up", said Nicholas Hyett, equity analyst at London-based stockbrokers Hargreaves Lansdown.

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Coca-Cola has over 500 brands in its stable including Fanta, innocent smoothies and Powerade sports drinks.

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.

Whitbread will now focus on the growth opportunities for its leading hotel business, Premier Inn, in the United Kingdom and Germany.

Then Coca-Cola got in touch with what Whitbread said was a "highly compelling" offer.

Whitbread will use a "significant majority" of the net cash proceeds - around 3.8 billion pounds after taking into account such things as transaction costs - returning cash to shareholders. Some will be used to pay down debt and make a pension fund contribution.

Whitbread stock jumped 18% in London following the announcement, while Coca-Cola shares traded down about 0.1% at $44.89 early Friday morning, in a 52-week range of $41.45 to $48.62 and with a consensus price target of $50.72.

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