Costa Coffee to split from Whitbread

Whitbread has confirmed that it plans to split off Costa Coffee, the UK’s biggest coffee chain, to create a separately listed business.

The UK-based company, which owns hotel chain Premier Inn, restaurant chain Beefeater a well as Costa Coffee, said that it would demerge from the coffee chain within two years.

Activist investors Elliott Advisors and Sachem Head together control 10% of the FTSE 100 firm’s shares.  

In separating the brand, Whitbread says it will allow shareholders to invest in “two distinct, focused and market-leading businesses.”

The hospitality company also said that the split would give "greater operational focus and afford investors greater clarity on profit and cash generation."

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Chairman Adam Crozier said: “The board fundamentally believes this is the best course of action to optimise value for shareholders over the longer term and will ensure both Premier Inn and Costa are positioned well to thrive as independent companies."

The announcement came as Whitbread announced its annual results, reporting a 6.4% rise in pre-tax profits to £548mn.

The company said that these results were boosted thanks to strong international sales at Costa and a surge in London hotel bookings. 

Alison Brittain, chief executive of Whitbread, said that the separation of the company had been in discussion “for years.”

She said: “Given the significant strategic progress that has been made and the momentum in the delivery of the plan, the board is confident that both Premier Inn and Costa will soon be businesses of sufficient strength, scale and capability to enable them to thrive as independent companies.” 

Costa Coffee is the biggest coffee chain in the UK with more than 2,400 coffee shops and it also has an additional 1,400 outlets in 31 overseas markets.