KO Coca Cola Company

By Ian Walker 

Coca-Cola Co. on Friday said it would buy British coffee-shop chain Costa for $5.1 billion, diversifying further from its soft-drink roots and marking the latest bet by a major consumer goods company on coffee.

Costa, a rival to Starbucks Corp. in the U.K., has nearly 4,000 stores in 32 countries and also sells coffee in grocery shops and gas stations. Founded in London in 1971, it also has a growing presence in China.

Coke said the purchase would give it a strong position in coffee across parts of Europe, Asia and the Middle East. It already sells some coffee products and owns the Georgia brand in Japan.

Coffee has recently been a hot industry for M&A. Nestlé SA earlier this year bought the rights to sell Starbucks in grocery and retail stores for more than $7 billion. JAB Holding Co., a European holding company, has also moved aggressively to buy up coffee assets.

The acquisition is also the latest sign of how soda makers are diversifying as they look to move beyond sugary pop. PepsiCo Inc. earlier this month bought seltzer-machine maker SodaStream International Ltd. for $3.2 billion. Coke itself has looked to broaden its range, launching more than 500 new products and variants last year.

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

Coke is buying Costa from British leisure group Whitbread PLC, which also owns the Premier Inn hotel brand in the U.K. and Germany. The company, which first flagged a possible Costa spinoff in April, said it would return most of the money to its shareholders. Its shares soared 18% in early trading Friday.

Costa generated revenue of GBP1.3 billion ($1.69 billion) in the year ended March 1 and earnings before interest, taxes, depreciation and amortization of GBP238 million. Whitbread said it expected the deal to be completed in the first half of 2019.

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

August 31, 2018 03:54 ET (07:54 GMT)

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