Coca-Cola is buying Costa Coffee for $5 billion

Coca-Cola is buying Costa Coffee for $5 billion

Coca-Cola is buying Costa Coffee for $5 billion

"Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand", Coca-Cola CEO James Quincey said.

For Coca-Cola, the deal adds to its efforts to move away from fizzy drinks towards more healthier options for increasingly health-conscious consumers. Earlier this month, PepsiCo agreed to pay $US3.2 billion for SodaStream, which makes carbonated-water dispensers.

"On the one hand £3.9bn is an undeniably rich valuation and likely far better than Costa could achieve as an independently listed company, valuing its earnings higher than those of the mighty Starbucks (Hanover: SRB.HA - news)".

Whithead had acquired Costa Coffee in 1995 for £19 million (Rs 1.75 billion), when the chain had only 39 stores in the United Kingdom.

Whitbread's share price was up nearly 16 per cent to £46.56 following the announcement, while London's benchmark FTSE 100 index on which it trades was down 0.3 per cent. Costa is Britain's biggest coffee company with over 2,400 coffee shops in the United Kingdom and another 1,400 in more than 30 countries.

So Costa Coffee as we know it may soon change - and will undoubtedly sell more Coke than it used to.

"Whitbread, which also owns budget hotel chain Premier Inn, said that its board had unanimously approved the deal, and that it expects the sale to be completed by the first half of 2019".

"This is a bitter sweet moment for Whitbread investors", said Nicholas Hyett, equity analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news). "A significant majority" of the proceeds will be given to the shareholders, the firm added.

Whitbread announced earlier this year that it was planning to spin off Costa.

It has recently expanded into China after growth in Britain became harder to find in a market bursting with chains such as Starbucks, Caffe Nero and thousands of independent outlets.

Nestle joined the trend of coffee giants taking aim at smaller niche producers, buying Blue Bottle Coffee and Chameleon Cold Brew.

Coke sells coffee under the Georgia brand in Japan, and has some other local products for specific markets. And in another union of the java and soft-drink worlds, JAB's Keurig Green Mountain Inc. this year bought Dr Pepper Snapple Group for $18.7 billion.

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