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Coca-Cola is to buy the Costa coffee chain from owner Whitbread in a deal worth £3.9bn. Whitbread had intended to spin off the chain as a separate firm, but said a straight sale was more profitable.

Chief executive Alison Brittain said Whitbread would now focus on its Premier Inn business in the UK and Germany. Whitbread bought Costa, which is now the UK’s biggest coffee chain, for just £19m in 1995.

At the time, it had just 39 outlets. It now has more than 2,400 UK coffee shops, as well as some 1,400 outlets in 31 overseas markets. Costa Express has 8,237 vending machines worldwide. Whitbread shares rose more than 17% in early Friday trading.

For years, demerger was a dirty word at Whitbread. When asked, as they often were, about the logic of having a hotel chain and a coffee chain in the same company, executives would extol the benefits of having two leisure brands under one roof.

Shareholders were always less convinced, but were happy to go along with the idea while Whitbread grew its revenue, profits and share price at a steady clip over the last decade.

All that changed with the arrival of Alison Brittain as chief executive – and the appearance on the shareholder register of Elliott Management, an aggressive, deep-pocketed US hedge fund with a track record of shaking up big companies. It pushed hard for a demerger, and Ms Brittain, who judged that Costa and Premier had reached sufficient scale to stand on their own feet, opened the door.

The plan was that Costa would be spun off at some time in the next two years, but Coca-Cola pre-empted that with a knockout offer.

While this is a landmark deal for Whitbread, it is also a significant move for Coca-Cola, taking it into hot beverages for the first time and, it hopes, providing the growth for which its investors have been crying out.

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