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Britain's Whitbread Plc said on Friday it had agreed to sell coffee chain Costa to Coca Cola for an enterprise value of £3.9 billion ($5.1 billion).
The deal was unanimously agreed by the Whitbread board to be in the best interests of shareholders, the company said in a statement. It acquired the chain in 1995, for £19 million when it had only 39 shops.
James Quincey, the Coca-Cola President and CEO, said that the deal gives his company new capabilities and expertise in coffee.
"Our system can create opportunities to grow the Costa brand worldwide. Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand," he said in a statement.
Alison Brittain, the chief of hospitality company Whitbread, called the sale a "unique strategic opportunity to combine the Costa brand with Coca-Cola's global scale, product and distribution capabilities." Speaking to CNBC's "Street Signs," she said it was great for the U.S. drinks firm who was looking for a coffee platform.
"It's a great deal for both companies," she said, also mentioning that Elliott Advisors, the activist hedge fund, would be "delighted." Elliott became the company's largest shareholder this year and increased pressure on Whitbread for a break up of the business.
She also reportedly told BBC Radio that she believed the company got a high price for the coffee chain, adding that it was above anything that the firm could have achieved with a demerger.
Shares of Whitbread soared around 17 percent higher as European trade began on Friday morning. Whitbread said it will reduce debt and contribute to the pension fund with the proceeds from the deal and further expand its hotel chain Premier Inn in the U.K. and Germany.
For Coca-Cola, the deal adds to its efforts to move away from fizzy drinks toward more healthier options for increasingly health-conscious consumers.
Richard Clarke, a senior analyst at brokerage firm Bernstein, agreed with Brittain calling the price "materially higher" than the company would have hoped for.
"This price, this is the right thing for shareholders do," he told CNBC's "Squawk Box Europe" Friday. "They were going to split the business off anyway ... It is the right decision to cut and run, if you like."
Jon Cox, the head of European consumer equities at Kepler Cheuvreux, added that Coca-Cola is paying "top dollar" to get into the hot drinks segment, adding that the price looks "pretty rich." He said that it made sense for the large soda firms to look at diversifying into other drinks categories due to sugar taxes. He added that the millennial generation is driving the growth in coffee currently and this trend will continue as they age.