The European Commission has cleared the sale of the Costa Coffee chain to
US drinks maker Coca-Cola from British restaurant
and hotel owner Whitbread.
"The Commission concluded that the proposed acquisition
would raise no competition concerns because the companies do not
sell the same products and the links between their activities
are limited," the EU executive said in a statement.
Whitbread: 'sentiment remains positive'
Richard Hunter, head of markets at interactive investor, has commented on those Whitbread half-year figures,. He said:
Whitbread is in something of a holding pattern at present, with the Costa sale leaving Coca-Cola requiring regulatory approvals. The separation of the business has long been called for by investors and the sale has helped the share price rise by 13% over the last three months. Although the company is in the throes of an important strategic change, sentiment remains positive, with the market consensus of the shares coming in at a cautious buy.
Whitbread Zips it up
Whitbread has revealed a bit more about its "innovative new format" called Zip by Premier Inn in its half-year results today.
The company says it is a "significantly different offer" to the traditional Premier Inn and Hub formats and will attract a different customer segment.
"The essence of Zip is good quality, small, very simple rooms targeting a large segment of the market, which is currently underserved; the extra-value seeking customer. Importantly, these target customers do not currently stay at Premier Inn and are dissatisfied with their current options.
"By reducing the room size to 8.5m2 and carefully engineering the design and fittings, return on capital is expected to be comparable to the rest of the network, whilst offering highly compelling prices."
The first Zip will open in Cardiff in the first quarter of next year.
Whitbread happy with half-year figures
Whitbread says it is on track to meet its full-year forecasts after posting positive figures for the half-year.
Revenue climbed 2.6% to £1,079m while statutory profit before tax was maintained at £257m.
Alison Brittain, Whitbread chief said: "The highlight of the first half was the announcement of our agreement for the sale of Costa to The Coca-Cola Company for £3.9bn."
It said its UK network increased to more than 74,000 rooms.
Coca-Cola is to buy the Costa coffee chain from owner Whitbread in a deal worth £3.9bn.
A potted history of Whitbread
Business reporter, BBC News
Whitbread was founded in 1742. Here's what they've done since:
1750 - creates the UK's first mass production brewery in east London
1868 - begins manufacturing beer in bottles.
1968 - starts brewing Heineken under licence, giving it a fifth of the UK lager market in just three years.
1974 - the first Beefeater steakhouse opens
1987 - the first Travel Inn follows
1990s - snaps up UK chains including David Lloyd Leisure, Marriott Hotels, TGI Fridays, Pizza Hut and Premier Lodge hotels.
1995 - pays £19m in for Costa Coffee when it had 39 outlets.
2000 - the brewery business is sold leaving Whitbread to focus on brands like Costa and Premier Inn
Costa was 'exposed'
For Coca-Cola, buying Costa is an "ideal
way into a frothy market that it’s maybe missed out on so far", according to Neil Wilson, an analyst at Markets.com with a more positive view of the deal.
And if you're looking for an explanation on why Costa would sell, have a look at the numbers, he says. Sales growth is "stalling".
"Costa is exposed to areas like the High Street where lower footfall translates into fewer cups of coffee being sold".
The company has also been struggling to attract hipsters.
"We continue to
see Costa facing tougher competition from artisan coffee retailers
who are taking market share".
Whitbread will miss 'caffeine high'
A note of doubt over Whitbread's strategy, despite the strong share performance this morning.
remains of Whitbread, essentially just Premier Inn, will focus on expansion
plans in the UK and Germany from here on," says Hargreaves Lansdown's Nicholas Hyett.
"Progress has been good and we believe
the product is excellent, but it’s a very different business to Costa and
growth will be slower and demand more up-front investment. An excellent deal it
may be, but Whitbread investors may miss the
caffeine highs Costa serves up.”
Coke's plans for Costa
Ms Brittain explains Coca-Cola's rationale for buying Costa.
"They want the coffee product, they have no coffee in their range," she tells the Today programme.
She thinks the beverage giant will use Costa to create "ready to drink, cold brew coffees".
"You could see Costa absolutely everywhere, in vending machines, hotels, restaurants, pubs, cafes - in all the places you see Coke today."