According to the Financial Times (FT), which broke the story, the US firm paused discussions with remaining bidders in December, ending an auction process that had last several months.
News first broke in August that Coca-Cola had actioned a review of its Costa business – which it acquired for close to £4 billion from Whitbread in 2018.
Undertaking the assessment in partnership with bankers, the multinational had mulled over selling Costa Coffee, which is the UK’s largest coffee chain, at a cut-price deal, potentially only recouping half of what it paid for it.
Setting an asking price of only £2 billion, Coca Cola was looking to put an end to the difficulties it has faced with the subsidiary over the past several years, which has notably been affected by a significant hospitality downturn amid a consistently challenging economic climate in its home market.
Costa Coffee has, like many high street coffee chains in the UK, been particularly affected by the Covid pandemic and Brexit, but also by increasingly diversified competition, a spiralling cost-of-living crisis and a global rise in bean prices.
Companies involved in advanced negotiations to buy the business are said to have included the likes of Asda owner TDR Capital, and Bain Capital’s special situations fund, which owns Gail’s Bakery and PizzaExpress.
Private equity firms Apollo, KKR and Centurium Capital were also involved earlier in the process, which was handled by investment bank Lazard.
Outgoing CEO, James Quincey, had previously told investors that the chain, which operates around 2,700 sites in the UK and Ireland, had “not quite delivered” for Coca-Cola and that it was “not where [management] wanted it to be from an investment hypothesis point of view”.
The company now reportedly believes that holding onto Costa Coffee might offer greater rewards in the long run, instead of selling up now at a considerable loss.
