Whitbread has reignited speculation over an eventual £3bn demerger of its Costa coffee shops after buying back one of the fast-growing chain’s biggest franchisees, Life Coffee Cafés, in a deal valued at c£11.5m, writes The Times.
Life Coffee Cafes is Wimbledon-based and operates 16 Costa stores located across the south of England from Bodmin to Dartford to Wolverhampton.
Simon Berry, a former managing director of Xscape, the ski-centre operator, and Mark Upton, a former head of acquisitions for Pizza Hut UK & Ireland, set up the business in 2004.
An analyst told the newspaper: “Instead of deriving a modest royalty from these stores, Whitbread will now keep all the profits, in turn boosting the value of Costa when it is eventually spun off, which we expect to happen next year.”
A spokeswoman for Whitbread confirmed that it had acquired Life Coffee Cafés, which has about 200 employees, but insisted that, while it was the first acquisition of a sizeable franchisee, the deal had no wider implications for the business.
She told The Times that the group continued to “believe in the mixed business model of franchise and equity stores” and added: “The business had been put up for sale and we took the opportunity to purchase it as it is focused on the retail park and drive-through sectors — a key priority for Costa’s continued growth.”
Asked whether further such deals were being contemplated, she said: “We will review the opportunities on a case-by-case basis to determine if it fits with our strategy.”
