Coca-Cola is to buy the Costa coffee chain from owner Whitbread in a deal worth £3.9bn.
Whitbread said its board had unanimously approved the deal as being in the best interests of shareholders.
Chief executive Alison Brittain said Whitbread would now focus on its Premier Inn business in the UK and Germany.
Whitbread bought Costa, which is now the UK’s biggest coffee chain, for just £19m in 1995.
At the time, it had just 39 outlets. It now has more than 2,400 UK coffee shops, as well as some 1,400 outlets in 31 overseas markets. Costa Express has 8,237 vending machines worldwide.
Ms Brittain said: “This transaction is great news for shareholders as it recognises the strategic value we have developed in the Costa brand and its international growth potential and accelerates the realisation of value for shareholders in cash.
“The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders.
“Whitbread will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn.”
‘Win-win’ deal
Whitbread announced earlier this year that it was planning to spin off Costa.
Speaking on the BBC’s Today programme, Ms Brittain explained that Coca-Cola wanted to buy Costa because “they want the coffee product, they have no coffee in their range”.
She said the money from the sale would be used to expand the Premier Inn chain, pay down debt and boost the pension fund.
Describing the sale as a “win-win” for everyone. she said the price paid by Coca-Cola was far higher than if Costa had been demerged into a stand-alone company on the stock market.
She said she thought the beverage giant would 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,” she added.
The deal is subject to the agreement of Whitbread’s shareholders and various other approvals, including from anti-trust bodies.
It is expected to complete in the first half of next year.
