Whitbread Stock Up On Deal To Sell Costa Coffee Brand To Coca-Cola For $5.1 Bln

(RTTNews) - Shares of Whitbread plc (WTB.L) were gaining around 16 percent in London trading after the British hotel, coffee shop and restaurant company on Friday agreed to sell its coffee brand Costa Limited to Coca-Cola Co. (KO). The deal is valued at 3.9 billion pounds or $5.1 billion.

Whitbread said it will focus on the attractive structural growth opportunities for its hotel business, Premier Inn, in the UK and Germany.

Whitbread Board unanimously agreed the deal to be in the best interests of shareholders, and will be seeking shareholder approval.

The deal is subject to customary closing conditions, including antitrust approvals in the European Union and China. It is expected to close in the first half of 2019.

Whitbread said the net cash proceeds are expected to be approximately 3.8 billion pounds at completion. Whitbread will reduce financial indebtedness and make a contribution to the pension fund, which will both provide headroom for further expansion of Premier Inn in the UK and Germany.

Costa was founded in London in 1971. Whitbread acquired Costa in 1995 for 19 million pounds when it had only 39 shops. Costa's current operations include nearly 4,000 retail outlets with highly trained baristas, a coffee vending operation, for-home coffee formats and Costa's state-of-the-art roastery.

For the fiscal year 2018, Costa generated revenue and EBITDA of 1.3 billion pounds and 238 million pounds, respectively. This equates to roughly $1.7 billion in revenue and $312 million in EBITDA.

In its statement, Coca-Cola said it expects the transaction to be slightly accretive in the first full year, not taking into account any impact from purchase accounting.

The acquisition is expected to give Coca-Cola a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion.

Coca-Cola added that as it expects the transaction to close in the first half of 2019, there is no change to 2018 guidance. The company's long-term targets also remain unchanged.

Further, Whitbread said its hotel business Premier Inn will continue to develop its highly successful and unique business model, with even greater focus and financial investment.

In London, Whitbread shares were trading at 4,665 pence, up 16.04 percent.

In pre-market activity on the NYSE, Coca-Cola shares were losing 0.58 percent to trade at $44.69.