Jim Armitage: Coffee coup that started over a latte will boost both businesses

Fittingly, the excellent Costa deal all started over a latte in Seattle, home of the daddy of the coffee bar chains, Starbucks.

Coke boss James Quincey had been looking at the coffee market for a long while, and at Costa in particular (note to the Whitbread activists at Elliott — long before you came along).

In May, he was ready to phone his pal Whitbread chairman Adam Crozier, to talk about a deal. Crozier said his chief executive Alison Brittain was in Seattle at a Microsoft conference. “Me too!” said Quincey. They met for coffee and the ball got rolling.

Serendipity runs throughout this deal. Coke wanted a deal to launch into coffee in a global, big-brand way.

Whitbread was open to talk and its international push was gathering steam. Costa’s high-quality vending machine technology will also be easily scalable alongside the US Coke’s 10 million drinks machines.

Plus, its brand and sourcing power gives Coke the power to develop bottled iced coffees to rival Starbucks.

Whitbread shareholders now get instant cash from their coffee business at a price way above what a demerged Costa would have traded at, and beyond anything the private equity firms who’ve been sniffing around would pay.

Standalone Costa was to be valued at 10 times its annual profit. Coke is paying 16.4 times. Oh, and by the way, Pret A Manger just got sold for 15 times.

Now, shareholders will get perhaps £2.9 billion in cash proceeds. What’s more, the pension deficit and debt pile get big slugs of cash, leaving Premier Inn freer to expand its promising German operations.

Caffeine boosts all round.