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Coca-Cola to Acquire UK Coffee Brand Costa from Whitbread in USD 5.1bn Deal.

MANews-(C)2009-2018

31 August 2018 - Atlanta, US-based soft drink giant The Coca-Cola Company (NYSE: KO) has reached a definitive agreement to acquire UK-based coffee brand Costa Ltd. from British hospitality company Whitbread plc (LSE: WTB) in a deal valued at USD 5.1bn, the company said.

Costa was founded in London in 1971 and has grown to become a major coffee brand across the world.

The acquisition 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 ranks as the leading coffee company in the United Kingdom and has a growing footprint in China, among other markets.

Costa has a market 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 GBP 3.9bn. This translates to approximately USD 5.1bn. Upon the closing, The Coca-Cola will acquire all issued and outstanding shares of Costa Ltd., 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 the fiscal year 2018 (ending March 1, 2018), Costa generated revenue and EBITDA of GBP 1.3bn and GBP238 m GBP, respectively.

This equates to roughly USD 1.7bn in revenue and USD 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. Coca-Cola will provide additional information as part of comprehensive guidance provided during the fourth quarter 2018 earnings call.

Rothschild acted as exclusive financial adviser to The Coca-Cola Company. Clifford Chance acted as legal counsel to The Coca-Cola Company, and Skadden, Arps, Slate, Meagher and Flom acted as tax counsel to The Coca-Cola Company.

Country: UK

Sector: Food/Beverages/Tobacco

Target: Costa Ltd

Buyer: The Coca-Cola Company

Vendor: Whitbread plc

Deal size in USD: 5.1bn

Type: Corporate Acquisition

Financing: Cash

Status: Agreed

Buyer advisor: Rothschild , Clifford Chance , Skadden, Arps, Slate, Meagher and Flom

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Publication:M & A Navigator
Geographic Code:4EUUK
Date:Aug 31, 2018
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