Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Barclays ups Whitbread to ‘overweight’, thinks Costa Coffee disposal underpins Premier Inns equity story

Barclays’ analysts said the significant value unlocked by Whitbread’s move to sell its Costa Coffee chain for £3.9bn to Cola-Cola gives the UK firm “interesting optionality”
Costa Coffee cup
The bank also raised its target price for the FTSE 100-listed firm to 5,550p, up from 4,470p previously, offering 20% upside potential

Barclays has upgraded its rating for Whitbread PLC (LON:WTB) to ‘overweight’ from ‘neutral’ as it thinks the leisure firm’s sale of Costa Coffee business underpins the rump Premier Inns equity story.

The bank also raised its target price for the FTSE 100-listed firm to 5,550p, up from 4,470p previously, offering 20% upside potential with the shares currently changing hands at 4,642p each, up 0.06% on Thursday’s close.

READ: Whitbread shares froth higher as it agrees to sell Costa coffee to Coca-Cola for £3.9bn

In a note to clients, Barclays’ analysts said the significant value unlocked by Whitbread’s move to sell its Costa Coffee chain for £3.9bn to Cola-Cola Inc (NYSE:KO) gives the UK firm “interesting optionality”.

They added: ”We see Premier Inn as a strong format with potential to become a structural winner and to further improve execution with no Costa distraction.”

Whitbread bought Costa for £19mln in 1995 when the business had just 39 outlets. It is now the UK's largest coffee chain with more than 2,400 UK coffee shops and 1,400 outlets in 31 overseas markets.

The group said it plans to return a “significant majority” of proceeds from the disposal to shareholders.

The deal representing a multiple of 16.4x Costa’s fiscal year 2019 earnings (EBITDA).

View full WTB profile View Profile

Whitbread plc Timeline

Related Articles

ZoomAway Travel Inc embracing blockchain, which is set to push out middle man in hospitality and act
January 11 2018
The firm plans to begin rolling out cryptocurrency payments into its white label and registration management system (RMS) clients
Oil pollution
July 02 2018
A name change might be in order if PCG pulls the trigger on two investments it is mulling
Festival crowd
August 20 2018
There could be a potential uplift of in both revenue and underlying earnings if the firm manages to capture a slice of the UK's 4mln festival-goers

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use