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Coca Cola forays into coffee with a big ticket acquisition of Costa, the UK coffee chain

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Global soda and fizzy drinks major Coca Cola inked a deal to acquire Costa, the UK coffee chain, a competitor of Starbucks, for $5.1 billion. The coffee chain of Whitbread PLC, the London listed entity, has more than 4000 outlets, and with this acquisition, Coca Cola is making a strong push to enter the healthier drinks market, in an attempt clearly aimed at the health conscious patrons.

Market pundits had expected the tag to be a bit lower than the 3.9 billion pounds deal that included debt.  With this acquisition the company aims to give competition to the leader, Starbucks that clearly has a head start with an established presence across 77 nations. Coca Cola growing at 6% aims to have a slice of the lucrative market with this diversified product mix.

James Quincey, CEO, Coca Cola, expressed hope that this will give the soda giant a better footprint in markets with a better portfolio. The company has an ambitious plans to have a  better presence with more products including roasted coffee beans and the popular Costa vending machines.  The market is certainly not up for grabs with many players including Starbucks, Nestle, Kenco, Douwe Egberts and Dr Pepper Snapple fighting for their share of the market with bug ticket acquisitions and licensing deals.

The deal which is slated for completion before mid-2019 will permit Whit bread PLC to return the money of shareholders. The acquisition of this brand that has a very high visibility in Britain, will significantly boost its performance and bring greater value to the coffee chain. Established in 1971, the brand has a very strong and rich presence in locations where coffee is heavily consumed.  The company had begun expansion into China, as other markets were increasingly difficult to penetrate.

Coca Cola’s advisor in the deal was Rothschild, while Whitbread had the trio of Deutsche Bank, Morgan Stanley and Goldman Sachs advising them on the deal. Alison Britain, Chief Executive of Whitbread expressed happiness over the deal saying that the brand has moved on to the right company who would be able to nurture and add value to Costa.

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