Coke into coffee: Coca-Cola buys United Kingdom coffee chain Costa for $7 billion

Coke into coffee: Coca-Cola buys United Kingdom coffee chain Costa for $7 billion

Coke into coffee: Coca-Cola buys United Kingdom coffee chain Costa for $7 billion

Coca-Cola Co (KO.N) has agreed to buy coffee chain Costa for $5.1 billion (3.9 billion pounds) including debt to extend its push into healthier drinks and take on the likes of Starbucks and Nestle in the booming global coffee market.

Costa gives Coca-Cola a global coffee footprint with almost 4,000 retail outlets in more than 30 countries.

Whitbread bought Costa for 19 million pounds in 1995, when it had just 39 shops.

The purchase of the biggest coffee chain behind Starbucks adds to Coca-Cola's drive to diversify away from fizzy drinks and expand its options for increasingly health-conscious consumers, after countries started introducing sugar taxes. He said: "Costa is a platform with a great supply chain in coffee, a world-class roastery, a strong retail presence and a vending system".

It says the proceeds of the buyout will be used to reduce debt, boost its pension pot, as well as giving it cash to grow its Premier Inn hotel chain in the United Kingdom and Germany.

The company will return most of the proceeds to its shareholders, it said. The company also operates a business of 8 000 self-service machines. It expects the transaction to be completed in the first half of 2019.

Describing the sale as a "win-win" for everyone, she said the price paid by Coca-Cola was far higher than if Costa had been demerged into a stand-alone company on the stock market.

JAB added the United Kingdom -based food-and-coffee chain Pret A Manger in a $2 billion deal earlier this year, following its past acquisitions of high-end coffee brands Peet's and Stumptown.

"They have been scanning for a coffee acquisition and they have been doing work on Costa for quite some time", she said.

The coffee brand will help Coca-Cola achieve its goal of being a total beverage company that sells everything from water to sports drinks, he said.

Whitbread had meant to spin off the chain as a separate firm, but said a straight sale was more profitable.

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.

While the bulk of the proceeds will be returned to shareholders, it will use some of the cash to pay down debt and address its 350 million-pound pension deficit, to give it the flexibility to continue expanding its Premier Inn hotels in the United Kingdom and Germany, which will become its main business. Coca-Cola shares were little changed.

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