Coca-Cola (KO) Struggles to Salvage Costa Coffee Sale

The Coca-Cola Company (NYSE:KO) is included among the 12 Best Dogs of the Dow to Invest in.

The company’s plan to sell Costa Coffee is close to falling apart, according to a report by The Financial Times. The Coca-Cola Company (NYSE:KO) held what were meant to be last-ditch talks with private equity firm TDR Capital over the weekend, hoping to keep the process alive. People familiar with the situation say the discussions failed to gain traction.

TDR, the owner of Asda, had been chosen as Coca-Cola’s preferred bidder earlier last week. That decision followed a board meeting in New York. The choice looked settled at the time. Negotiations between Coca-Cola, its advisers at Lazard, and TDR have run into trouble over valuation. The price gap has proved hard to bridge, according to one person involved.

The Coca-Cola Company (NYSE:KO) is now expected to decide next week whether to walk away from the sale entirely. The current structure would see Coca-Cola keep a minority stake in Costa, which could be increased in Coca-Cola’s favor if it helps close a deal. Even so, agreement remains uncertain.

The Coca-Cola Company (NYSE:KO) had been targeting a price of around £2bn for Costa, as previously reported by the Financial Times. That figure is well below what the company paid in 2018. Coca-Cola spent £3.9bn to buy Costa from Whitbread, the owner of Premier Inn. Since then, the chain has struggled to keep pace with smaller independent cafés and value-focused competitors like Greggs. Footfall has been uneven, and margins have faced pressure.

TDR is interested in Costa’s UK and international operations, excluding China. The firm also co-owns EG Group, the petrol forecourt operator, which already runs a large network of food and beverage outlets.

The Coca-Cola Company (NYSE:KO) operates as a global drinks powerhouse that makes and sells everything from its flagship soda to water, tea, coffee, juice, and sports drinks. Its portfolio spans more than 200 brands, distributed worldwide through local bottling partners.

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