Whitbread soars as investors cheer £4bn Costa sale: Now firm will expand Premier Inn hotel chain 


Whitbread shares soared as investors welcomed plans to sell Costa Coffee to Coca-Cola for £3.9billion.

In a move that took the City by surprise, Whitbread chief executive Alison Brittain offloaded the coffee chain for £1billion more than expected.

The 53-year-old will now focus on expanding the firm’s Premier Inn hotel chain – particularly in Germany.

Costa lot :In a move that took the City by surprise, Whitbread chief executive Alison Brittain offloaded the coffee chain Costa to Coca-Cola for £1bn more than expected

Costa lot :In a move that took the City by surprise, Whitbread chief executive Alison Brittain offloaded the coffee chain Costa to Coca-Cola for £1bn more than expected

Costa lot :In a move that took the City by surprise, Whitbread chief executive Alison Brittain offloaded the coffee chain Costa to Coca-Cola for £1bn more than expected

The move follows pressure from investors to break-up Whitbread, which also owns the Brewers Fayre and Beefeater restaurant chains.

Former Reckitt Benckiser chief executive Bart Becht, 62, was also interested in making a swoop for Costa. 

Bosses to rake in £3m 

Whitbread’s senior management will be handed up to £3.3million as a reward for selling Costa to Coca-Cola.

Alison Brittain, the hospitality giant’s chief executive, stands to receive a £1.7million bonus for her role in the deal – potentially taking her pay to £4.1million this year.

Finance chief Nicholas Cadbury is on course to get a £1million bonus, while human resources boss Louise Smalley could get £660,000.

The bonanza follows Whitbread’s pay committee proposed changes to its bonus schemes to take account of plans to sell its Costa brand.

Changes voted through by shareholders in June, a month after Brittain first met Coca-Cola boss James Quincey, introduced a performance pay scheme linked to the goal of selling Costa or carrying out a de-merger.

A Whitbread spokesman yesterday declined to comment on the pay scheme.

The Dutch businessman is the chairman of family owned JAB Holdings, which was founded by Johann Benckiser and Ludwig Reimann who married into the Benckiser family and owns Dr Pepper and Pret A Manger.

Whitbread shares rose 14.3 per cent, or 576p, to 4596p – the highest level for three years.

Brittain said: ‘This is a cracking deal. And it’s not just a cracking deal for Whitbread and its shareholders but it’s also a fantastic deal for Premier Inn because it’s going to fuel additional growth.

‘Coca-Cola has this massive distribution globally that’s available now to Costa and they will also produce new products like ready to drink cold coffee that will sit in the fridges of all the fridges of supermarkets in the world.

‘Costa is going for global domination,’ she said.

The deal will see Coca-Cola enter the coffee market for the first time, taking on Costa’s almost 4,000 cafes across 32 countries and 8,000 coffee express machines.

It sets the scene for a so-called ‘latte war’ as Costa goes head to head with Starbucks, the world’s biggest coffee brand.

Costa will have the spending power to develop chilled ready-to-drink coffees that will be available in supermarkets alongside similar Starbucks products and from Coca-Cola’s 10m vending machines around the world.  

Whitbread shareholders are expected to reap most of the rewards from the deal with analysts predicting investors could pocket between £2.5billion and £3billion. 

The rest of the proceeds will be used to fund Whitbread’s £350million pension deficit and pay some of its £833million debts. 

Deal struck in Starbucks’ back yard

Alison Brittain, left, Whitbread's chief executive, met fellow Brit and Coca-Cola counterpart James Quincey, pictured, in May in Seattle

Alison Brittain, left, Whitbread's chief executive, met fellow Brit and Coca-Cola counterpart James Quincey, pictured, in May in Seattle

Alison Brittain, left, Whitbread’s chief executive, met fellow Brit and Coca-Cola counterpart James Quincey, pictured, in May in Seattle

The bosses of Coca-Cola and Costa first met over a cup of coffee – in US rival Starbucks’s backyard.

Alison Brittain, left, Whitbread’s chief executive, met fellow Brit and Coca-Cola counterpart James Quincey, above, in May in Seattle, where Starbucks opened its first coffee shop in 1971.

The pair were put in touch by Whitbread chairman Adam Crozier, a friend of 53-year-old Quincey’s, while they were both attending the annual Microsoft CEO Summit. The secretive gathering is run by Bill Gates and attracts bigwigs such as Amazon boss Jeff Bezos, Warren Buffett and Netflix chief Reed Hastings.

The deal was codenamed ‘Project Del Sol’ by Coke in a pun on Spain’s Costa del Sol holiday coast. The Whitbread team used ‘Project Crimson’ in a nod to Costa’s red branding.

Writing in a blog online, Quincey said: ‘It’s very important to me that we let Costa be Costa.’

Costa’s pensioners will remain part of Whitbread’s pension scheme until the deal is completed when it will be transferred to Coca-Cola’s. 

Whitbread will focus on growing its hotels business with a particular eye on expanding Premier Inn further in Germany.

Whitbread has been under pressure from activist investors Elliott and Sachem Head, which had called for Costa to be spun off as a separate business to deliver more value to shareholders.

The firm had planned to demerge Costa by 2020 but Brittain said Coca-Cola came forward in June after taking an interest in the coffee chain for some months.

Costa will remain a separate brand under the Coca-Cola empire, much like smoothie maker Innocent Drinks, which sold a 32 per cent stake for £100million to Coke in 2013.

James Quincey, chief executive of Coca-Cola, said it was more likely Costa would go head to head with Starbucks in Europe and Asia than in the US.

Brittain said: ‘Everywhere I go I’m probably going to see a Costa drink and I’m going to smile wryly and think I had a hand in that. 

‘I am enormously fond of the brand and wish it every success.’

‘Great price’ says hedge fund Elliott 

Shortly after Alison Brittain announced her plan to sell Costa Coffee to Coca-Cola an email from a former adversary dropped into her inbox.

‘Bravo. Great price, great buyer,’ read the message to the Whitbread chief executive.

It was from Gordon Singer, the European boss of ruthless hedge fund Elliott and son of formidable investor Paul Singer. For months, Elliott had been pushing Whitbread to spin off its coffee shop business for a profit.

Singer’s fund was revealed to have built up a 6 per cent stake in Whitbread – becoming its largest shareholder – in April. New York-based Sachem Head Capital Management had also amassed a 3.4 per cent holding, piling pressure on Brittain to agree to a split.

The hedge funds had no involvement in the talks with Coca-Cola, Brittain said.

 

 



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