Whitbread shares are soaring as a Costa spin-off looks more likely

Alys Key
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Two major investors now back a spin-off of Costa (Source: Getty)

Shares in Whitbread are leading the FTSE 100 risers this morning as pressure grows on the company to spin out Costa as a separate company.

Whitbread was up as much as 8.5 per cent to 4,273p in morning trading, levels not seen since last June.

This came after it emerged that activist investor Elliott Advisors had built up a £430m position in Whitbread, making it the largest shareholder.

Read more: Costa spin-off could lead to £3bn Whitbread windfall – and cost just £20m

It is now joining calls for the company, which also owns Premier Inn and some pub brands, to demerge Costa.

Elliott joins Sachem Head, another major shareholder, which previously called for the spin-out after building its stake.

City A.M. understands that representatives of the fund have met with Whitbread's management with a view to pushing forward the demerger.

It is also likely that other shareholders would support the move, while City sources have said that there is active interest in Costa from several potential buyers.

City analysts have also been piling the pressure on Whitbread to take a decision on Costa in recent months.

"Premier Inn and Costa Coffee are uneasy bed-fellows as there are no material synergies between the businesses and the uncharitable view is that it is not always apparent what value the PLC adds to its constituents," commented analysts at Canaccord Genuity this morning.

With two activists now holding around 10 per cent of the company, Barclays analysts said a separation was more likely.

"We see the arrival of another material activist stake as increasing the probability that part of the upside scenario could be realised through a sale/separation of Costa," they said.

Read more: Das ist gut: Premier Inn is ramping up its German expansion plans

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