Coca-Cola’s takeover of Costa is likely to go through before next summer, with the deal now hinging solely on two anti-trust regulatory approvals in the EU and China.
Whitbread shareholders gave their approval to the £3.9 billion agreement earlier this month, paving the way for the transaction to move forward.
This morning, Whitbread said that the anti-trust clearances and completion of the transaction are expected to occur in the first half of 2019.
When the deal does go through, Whitbread will receive £3.8 billion net of tax, other transaction costs and separation costs, estimated to be approximately £100m.
The Whitbread board intends to return a large chunk of the net cash proceeds to shareholders, unless more value creating opportunities arise and subject to prevailing market conditions.
Net cash proceeds will also be used to reduce the group’s borrowings and pension fund deficit, which it says will provide headroom for further expansion of Premier Inn in the UK and internationally.
“We intend to return a significant majority of the net cash proceeds to shareholders, although the exact amount, timing and method will be determined following discussions with stakeholders, including our shareholders, pension fund and debt providers,” said Alison Brittain, CEO of Whitbread.
“Much work still remains to be done to ensure a smooth and successful separation from Whitbread at completion and during the following transitional service period, which we are confident in our ability to execute efficiently.”
Following the sale of Costa, Whitbread will become a focused hotel business with operations in the UK, Germany and the Middle East. In the first half of the year, Premier Inn delivered total UK accommodation sales growth of 4.8%.
Overall half-year revenues at Whitbread rose 3% to £1.07 billion, while underlying pre-tax profits increased 2.5% to £270m, according to figures published this morning.
Costa is now reported as a discontinued operation by Whitbread. It said that statutory profit for the period increased 3.5% to £47m.