Coca-Cola is buying Costa as the United Kingdom hits peak coffee


Coca-Cola Co (KO.N) has agreed to buy the world's second largest coffee chain Costa from Britain's Whitbread Plc (WTB.L) for $5.1 billion including debt, opening a new front in its push into healthier markets.

Whitbread bought Costa in 1995 from founders Sergio and Bruno Costa and presently runs about 2,400 stores in the United Kingdom and some 1,400 around the world.

The coffee industry is growing at a 6% annual clip, wrote Coca-Cola president and CEO James Quincey, and "it's more important than ever that Coca-Cola make a serious and significant investment in the category, because it's the right thing to do to serve our consumers with more of the drinks they want".

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

The deal still needs to get approval from shareholders and regulators, and is expected to be completed in the first half of 2019, the companies said.

Paying about 1 billion pounds more than some analysts had expected, Coke will use its distribution network to supercharge Costa's expansion as it chases current coffee chain market leader Starbucks (SBUX.O) and its nearly 29,000 stores across 77 markets.

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Whitbread agreed to sell Costa, which operates more than 3 800 locations in 32 countries, the companies said in a statement on Friday.

Costa has over 2,400 coffee shops in the United Kingdom and another 1,400 in more than 30 global markets.

"It's been a very fast transaction", she said.

Whitbread chief executive Alison Brittain said the sale will allow it to focus on its Premier Inn hotels business.

"This transaction is great news for shareholders as it recognises the strategic value we have developed in the Costa brand and its worldwide growth potential and accelerates the realisation of value for shareholders in cash", Whitbread's chief executive Alison Brittain said in a statement released to the stock market on Friday morning. The company will return most of the proceeds to its shareholders, it said.

The deal comes hot the heels of another big money acquisition in the sector.