Premier Inn owner Whitbread has said it will use some of the near-£4 billion pounds it will net from the sale of its Costa coffee brand to expand the hotel chain in the UK and Europe.
Whitbread had planned to demerge the coffee chain from its hotel business, but has now agreed to sell Costa for £3.9 billion to Coca-Cola.
The agreed price is considerably more than many analysts thought the coffee chain would be worth. Whitbread bought Costa in 1995 for £19 million.
The parent company said it will use the money to reduce debt, contribute to its pension fun and further expand its hotel chain Premier Inn in the UK and Germany.
In a statement, Whitbread said it intends to focus on Premier Inn’s ‘attractive structural growth opportunities’.
Chief executive Alison Brittain said: "The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders."
She added: "Premier Inn will continue to develop its highly successful and unique business model, with even greater focus and financial investment.
"Premier Inn will continue to take advantage of the considerable structural growth opportunities in the UK and accelerate its network expansion in Germany. This will deliver strong return on capital and significant value to shareholders over the long term."
The deal has been agreed unanimously by the Whitbread board and will now be put to shareholders. Whitbread shares soared 17% this morning after the sale was announced.
