Coca-Cola to acquire Costa in deal valued at $5.1B
Coca-Cola (KO) announced that it has reached a definitive agreement to acquire Costa Limited.
The acquisition of Costa from parent company Whitbread PLC is valued at $5.1B and will give Coca-Cola a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion.
Costa operations include a leading brand, 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 Coca-Cola, the expected acquisition adds a scalable coffee platform with critical know-how and expertise in a fast-growing, on-trend category. Costa has a solid presence with Costa Express, which offers barista-quality coffee in a variety of on-the-go locations, including gas stations, movie theaters and travel hubs.
Costa, in various formats, has the potential for further expansion with customers across the Coca-Cola system. The acquisition will expand the existing Coca-Cola coffee lineup by adding another leading brand and platform. The portfolio already includes the market-leading Georgia brand in Japan, plus coffee products in many other countries.
The purchase price is approximately $5.1B.
Upon the closing, Coca-Cola will acquire all issued and outstanding shares of Costa Limited, a wholly owned subsidiary of Whitbread. This subsidiary contains all of the existing operating businesses of Costa.
Whitbread will be seeking shareholder approval for the transaction, which is expected to take place by mid-October.
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. Coca-Cola expects the transaction to be slightly accretive in the first full year, not taking into account any impact from purchase accounting.
For FY18, Costa generated revenue and EBITDA of roughly $1.7B in revenue and $312M in EBITDA.
Because Coca-Cola 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.
To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.