Summary
The management team at Coca-Cola announced plans to acquire Costa for $5.1 billion.
This propels the beverage giant into the world of hot beverages and other offerings it had limited of or no exposure to previously.
The transaction is expensive, but proper execution leaves significant growth potential.
This is more directed at Starbucks than any other major player out there, and puts Coca-Cola on an interesting path.
*Taken from The Coca-Cola Company
The management team at The Coca-Cola Company (KO) just fired another massive shot in the beverage wars. In what has become its latest major strategy shift, management has committed shareholders to a sizable acquisition of Costa Limited, a UK-based coffee house with a massive presence in Europe. This comes shortly after the decision of PepsiCo (PEP) to buy SodaStream (SODA) and is a shot not only at it but, more importantly, at Coca-Cola’s new big competitor: Starbucks (SBUX). Though the transaction is costly and brings on a whole new range of considerations, with proper management, this deal could be a huge winner for Coca-Cola and its investors down the road.
A look at the transaction
Coca-Cola’s purchase of Costa is as simple as acquisitions get. In the first half of 2019, it’s believed that the deal will be completed, with Costa’s current owner, Whitbread LLC, receiving, at today’s exchange rate, $5.1 billion for its equity in Costa. Upon completion of the transaction, Coca-Cola will own a significant asset that will expand its areas of focus. For a look at how the firm’s focus will change, you need only look at the image below.
