Coca-Cola buys coffee chain Costa for $5.1 billion

Coca-Cola on August 31, 2018 said it had agreed to buy global coffee chain Costa from its owner Whitbread for $5.1 billion. (File/AFP)
Updated 31 August 2018
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Coca-Cola buys coffee chain Costa for $5.1 billion

LONDON: Coca-Cola on Friday said it had agreed to buy international coffee chain Costa from its UK owner Whitbread, in a deal that gives the beverages behemoth its first global coffee brand.
“Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market through a strong coffee platform,” Coca-Cola chief executive James Quincey said in a joint statement.
The deal for £3.9 billion ($5.1 billion, 4.3 billion euros) comes as consumer demand for conventional carbonated drinks shrinks in the US and other markets owing to health and obesity concerns.
Earlier in August, Coca-Cola’s arch-rival PepsiCo. struck a deal to buy Israeli company SodaStream for $3.2 billion — in a pitch to consumers concerned about mounting waste from soda cans and plastics in landfills worldwide.
SodaStream makes machines that carbonate home tap water.
Coca-Cola’s purchase adds to its Georgia coffee brand in Japan and the US group’s coffee products in other countries.
“Costa also provides Coca-Cola with strong expertise across the coffee supply chain, including sourcing, vending and distribution,” the soft drinks giant added.
Coca-Cola hopes to close the deal in the first half of next year, subject to shareholder and regulatory approvals.
The announcement comes three days after Nespresso maker Nestle said it sealed a deal to market the products of US coffee giant Starbucks around the world, outside of its cafes.
Following pressure from activist shareholders, Whitbread revealed in April that it would spin off Costa, leaving it to concentrate on its hotel chain Premier Inn.
Whitbread was forced to act after US group Elliott became its biggest shareholder with a six percent stake.


“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 chief executive Alison Brittain said in the statement.
“Whitbread will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn.”
Whitbread’s share price was up almost 16 percent to £46.56 following the announcement, while London’s benchmark FTSE 100 index on which it trades was down 0.3 percent.
“This is a bitter sweet moment for Whitbread investors,” noted Nicholas Hyett, equity analyst at Hargreaves Lansdown.
“On the one hand £3.9 billion 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.
“On the other, Costa has long been the jewel in Whitbread’s crown and some will be sad to see it go at any price, especially given the growth potential in China and elsewhere.”
Whitbread bought Costa in 1995 from founders Sergio and Bruno Costa and presently runs about 2,400 stores in the UK and some 1,400 around the world.
Costa also operates more than 8,000 Costa Express self-serve machines in eight countries, as well as placing its products in supermarkets.
Premier Inn has 785 hotels in the UK and a sprinkling of others in Germany and the Middle East.


Xi urges financial risk prevention while seeking stable growth

Updated 28 min 52 sec ago
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Xi urges financial risk prevention while seeking stable growth

  • China’s economy is growing at its slowest pace in almost 30 years
  • Preventing and resolving financial risks, especially systemic financial risks, is a fundamental task
BEIJING: China should seek stable development of its economy while not forgetting to fend off risks to its financial system, Chinese President Xi Jinping said, state news agency Xinhua reported on Saturday.
China’s economy is growing at its slowest pace in almost 30 years, spurring policymakers to bolster growth by easing credit conditions and cutting taxes.
“It is necessary to focus on preventing risks on the basis of steady growth, while strengthening the countercyclical adjustment of fiscal policy and monetary policy and ensuring that the economy operates in a reasonable range,” Xi said.
Preventing and resolving financial risks, especially systemic financial risks, is a fundamental task, the agency cited Xi as telling a study session for senior Communist Party officials on Friday.
On Wednesday, Premier Li Keqiang reiterated that China would not resort to “flood-like” stimulus such as it unleashed in past downturns.
But after a spate of weak data, investors are asking if Beijing needs to speed or boost support to reduce the risk of a sharper slowdown.
Until now, China has refrained from cutting benchmark interest rates to spur the slowing economy, which would ease financing costs but risk adding to a mountain of debt.
To free up more funds for lending to small and private businesses, the central bank has cut the reserves that banks need to set aside five times in the past year.
Last month, Chinese banks made the most new loans on record, a total of 3.23 trillion yuan ($481 billion). A central bank official said previously that no credit floodgate had been opened, and the lending jump showed recent easing steps were working.
China’s financial sector must serve the real economy, Xi said, but stable growth and risk prevention must be balanced.