Whitbread to focus on Premier Inn following Costa sale

Whitbread to focus on Premier Inn following Costa sale

Whitbread has entered into an agreement for the sale of Costa to Coca-Cola for £3.9 billion.

The move will leave the company free to focus on its Premier Inn brand.

Alison Brittain, Whitbread chief executive, commented: “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.”

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Whitbread said the deal offered a substantial premium to the value that would have been created through the previously announced demerger.

The company said net cash proceeds from the deal were expected to be approximately £3.8 billion at completion, after adjusting for estimated transaction and separation costs.

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, it the company has been focused on building Costa into a multi-channel, international coffee brand.

This has resulted in a “unique strategic opportunity” to combine the Costa brand with Coca-Cola’s global scale, product and distribution capabilities, Whitbread said.

The deal will allow Whitbread to focus on the structural growth opportunities for its hotel business, Premier Inn, in the UK and Germany.

“Premier Inn will continue to develop its highly successful and unique business model, with even greater focus and financial investment,” Brittain added.

“This will deliver strong return on capital and significant value to shareholders over the long term.”