Whitbread shareholders have agreed to the sale of Costa to Coca-Cola for a whopping £4bn, with the company’s share price inching higher following the announcement.
At a crunch meeting yesterday, investors voted almost unanimously in favour of the deal that will see Britain’s largest coffee chain change hands.
Whitbread, which owns Premier Inn, had bought the chain for just £19m in 1995.
The price Coca-Cola is willing to pay for the coffee chain that was founded by brothers Bruno and Sergio Costa in a small roastery in Lambeth in 1971 stunned investors and analysts when the proposed sale was announced at the end of August.
The acquisition is widely seen as an attempt by the fizzy drink giant to challenge the dominance of Starbucks and to ramp up competition in the ready-to-drink coffee market.
Alasdair Ronald, senior investment manager at Brewin Dolphin, described the deal as “an excellent outcome” for Whitbread’s shareholders, who will see a return of approximately £3bn and subsequently own a company focused almost entirely on hotel business.
“The enterprise value of £3.9bn is well ahead of previous City expectations that the business could be worth approximately £1.4bn and is a premium of 16.4 times Costa’s cash profits in the year to March 2018,” he said.
“This is also significantly higher than comparable sales, illustrating clearly that Costa is worth far more to Coca-Cola than it would have been as a standalone UK-based operator.”
“While the current economic environment is weak, Premier Inn is a very strong domestic player and we expect it to deliver on its current growth plans,” Ronald added.
The transaction is expected to complete in the first half of 2019.