Coca-Cola buys United Kingdom coffee company Costa for US$5.1bn | Leadership

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The Coca-Cola Company is acquiring coffee company Costa Limited for US$5.1 billion, a move that will give Coca-Cola a "strong coffee platform" across parts of Europe, Asia Pacific, the Middle East and Africa.

Rival PepsiCo, meanwhile, recently bought carbonated drink maker SodaStream, which produces machines that allow people to make fizzy drinks in their own homes. And in May, Nestle paid more than $7 billion for the rights to sell Starbucks coffee and tea in supermarkets and other stores outside its coffee shops.

The purchase from Britain's Whitbread of Costa's nearly 4,000 outlets thrusts the world's biggest soda company into one of the few bright spots in the sluggish packaged food and drinks sector. "Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand". JAB, the Luxembourg-based holding company that owns brands like Krispy Kreme and Peet's Coffee, bought United Kingdom sandwich and coffee chain Pret A Manger in May.

The coffee shop to hotels group said earlier this year that it would split Costa and list it as a separate entity, following pressure from activist investor Elliott.

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"Coca-Cola are one of the few companies in the world that could justify the valuation", said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

The deal comes hot the heels of another big money acquisition in the sector. "I'd like to welcome the team to Coca-Cola and look forward to working with them".

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

It acquired the chain in 1995, for 19 million pounds when it had only 39 shops.

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Then Coca-Cola got in touch with what Whitbread said was a "highly compelling" offer. According to the press statement, the transaction is expected to close in the first half of 2019.

"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".

Shareholders in Whitbread were impressed by the deal and the company's share price soared 16 percent in morning trading in London.

Doing so, Whitbread said, would "provide headroom" to expand Premier Inn in Britain and Germany. Some will be used to pay down debt and to make a contribution to the pension fund.

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