Coca-Cola takes big step into coffee with $5.1 billion Costa deal

Coca-Co has agreed to buy the world's second largest Costa from Britain's for $5.1 billion including debt, opening a new front in its push into healthier markets.

The two said on Friday that Coke, one of the biggest soft drinks groups in the world, would buy Costa's almost 4,000 outlets across markets such as Britain, and after Whitbread's board unanimously backed the deal.

Whitbread shares jumped 19 per cent in early trading, with dealers saying the purchase price was more than 700 million pounds ($911 million) higher than expected.

The purchase of the biggest behind 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.

"Hot beverages is one of the few segments of the total where Coca-does not have a global brand," Coca-said. "Costa gives us access to this market with a strong coffee platform."

Established in 1742 as a brewer, Whitbread had been in the process of demerging Costa from its after it came under pressure from hedge funds. The deal marks the latest transformation of a group that has held assets across the leisure, and drink </a>sectors.

Whitbread acquired Costa in 1995 for 19 million pounds when it had only 39 shops. It is now present on most British high streets, with 2,422 outlets across the country and a further 1,399 in international markets, operated as franchises, joint ventures and wholesale outlets.

It has recently expanded into after growth in Britain became harder to find in a market bursting with chains such as Starbucks, and thousands of independent outlets.

Whitbread said it would cut debt and contribute to its pension fund with proceeds from the deal and further expand its in Britain and

"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", Alison Britain said.

Rothschild advised Coke on the deal.

 

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