Never miss an issue of Master Investor Magazine – sign-up now for free!
FTSE 100 hospitality operator Whitbread (LON:WTB) has agreed the sale of its Costa Coffee brand to The Coca Cola Company for an enterprise value of £3.9 billion. This represents a 16.4x multiple on the brand’s EBITDA from last year’s results and a premium relative to the value that would be created through the previously announced demerger.
Net cash proceeds are expected to be around £3.8 billion at the time of completion and a significant portion of this income will be returned to shareholders.
Chief Executive Alison Brittain commented that: “I am delighted that we have agreed the sale of Costa to Coca-Cola for £3.9 billion. 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.
“The sale of Costa to Coca-Cola is another successful landmark in the 276-year history of Whitbread. 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, we have been focused on building Costa into a leading multi-channel, international coffee brand. This has resulted in this unique strategic opportunity to combine the Costa brand with Coca-Cola’s global scale, product and distribution capabilities. This combination will ensure new product development, continued growth in the UK and more rapid expansion overseas. As a result of this strategic sale our teams, pensioners, suppliers, shareholders and other stakeholders will all have the opportunity to share in the benefits.”
Shares in Whitbread were up by 16.32% (as of 14:40 BST).