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.


‘Don’t be too optimistic’: Huawei employees fret at US ban

Updated 26 May 2019
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‘Don’t be too optimistic’: Huawei employees fret at US ban

  • This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei
  • Another critical partner, ARM Holdings, said it was complying with the US restrictions

BEIJING: While Huawei’s founder brushes aside a US ban against his company, the telecom giant’s employees have been less sanguine, confessing fears for their future in online chat rooms.
Huawei CEO Ren Zhengfei declared this week the company has a hoard of microchips and the ability to make its own in order to withstand a potentially crippling US ban on using American components and software in its products.
“If you really want to know what’s going on with us, you can visit our Xinsheng Community,” Ren told Chinese media, alluding to Huawei’s internal forum partially open to viewers outside the company.
But a peek into Xinsheng shows his words have not reassured everyone within the Shenzhen-based company.
“During difficult times, what should we do as individuals?” posted an employee under the handle Xiao Feng on Thursday.
“At home reduce your debts and maintain enough cash,” Xiao Feng wrote.
“Make a plan for your financial assets and don’t be overly optimistic about your remuneration and income.”
This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei as a result of the ban.
Another critical partner, ARM Holdings — a British designer of semiconductors owned by Japanese group Softbank — said it was complying with the US restrictions.
“On its own Huawei can’t resolve this problem, we need to seek support from government policy,” one unnamed employee wrote last week, in a post that received dozens of likes and replies.
The employee outlined a plan for China to block off its smartphone market from all American components much in the same way Beijing fostered its Internet tech giants behind a “Great Firewall” that keeps out Google, Facebook, Twitter and dozens of other foreign companies.
“Our domestic market is big enough, we can use this opportunity to build up domestic suppliers and our ecosystem,” the employee wrote.
For his part, Ren advocated the opposite response in his interview with Chinese media.
“We should not promote populism; populism is detrimental to the country,” he said, noting that his family uses Apple products.
Other employees strategized ways to circumvent the US ban.
One advocated turning to Alibaba’s e-commerce platform Taobao to buy the needed components. Another dangled the prospect of setting up dozens of new companies to make purchases from US suppliers.
Many denounced the US and proposed China ban McDonald’s, Coca-Cola and all-American movies and TV shows.
“First time posting under my real name: we must do our jobs well, advance and retreat with our company,” said an employee named Xu Jin.
The tech ban caps months of US effort to isolate Huawei, whose equipment Washington fears could be used as a Trojan horse by Chinese intelligence services.
Still, last week Trump indicated he was willing to include a fix for Huawei in a trade deal that the two economic giants have struggled to seal and US officials issued a 90-day reprieve on the ban.
In Xinsheng, an employee with the handle Youxin lamented: “I want to advance and retreat alongside the company, but then my boss told me to pack up and go,” followed by two sad-face emoticons.