KKR makes surprise move to brew up Costa Coffee bid

The American investment giant KKR has made a surprise move to buy Costa Coffee, one of Britain's biggest high street hospitality groups.

Sky News has learnt that KKR is among a small number of parties in talks with The Coca-Cola Company and its advisers at Lazard, the investment bank, about a deal. KKR's involvement in the process is unexpected because it had appeared to drop its interest in a potential bid in late August, soon after news of the auction was revealed by Sky News.

Money blog: 'We protect the UK, our salaries can be limitless' Further details of KKR's offer were unclear on Monday, although one source said its interest remained fluid, and it was possible that it could still decide against a binding offer or choose to team up with another party. It joins rival bidders including Bain Capital, the part-owner of bakery chain Gail's, and TDR Capital, whose portfolio includes Asda.

Sources said that management presentations with potential bidders were due to get underway this week. Coca-Cola intends to retain ownership of Costa's ready-to-drink portfolio, which is also sold through other retailers.

Further bids for the business are understood to be due shortly. One insider has suggested that the value placed on Costa could be as low as £1.5bn, well under half the £3.9bn paid by Coca-Cola in 2021.

It was unclear whether Coca-Cola would be prepared to offload the business at that price. Costa trades from more than 2,000 stores in the UK and well over 3,000 globally.

It has been reported to have a global workforce numbering 35,000, although Coca-Cola has not responded to any questions from Sky News about the Costa business or sale process. Accounts filed at Companies House for Costa show that in 2023 the coffee chain recorded revenues of £1.22bn.

While this represented a 9% increase on the previous year, it was below the £1.3bn recorded in 2018, the final year before Coca-Cola took control of the business. Coca-Cola has been grappling with the weak performance of Costa for some time, with Coca-Cola boss James Quincey saying on an earnings call during the summer: "We're in the mode of reflecting on what we've learned, thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the Costa business successfully." "It's still a lot of money we put down, and we wanted that money to work as hard as possible." The deal was intended to provide Coca-Cola with a global platform in a growing area of the beverages market.

Costa trades in dozens of countries, including India, Japan, Mexico and Poland, and operates a network of thousands of coffee vending machines internationally under the Costa Express brand. The chain was founded in 1971 by Italian brothers Sergio and Bruno Costa.

It was sold to Whitbread for £19m in 1995, when it traded from fewer than 40 stores. KKR declined to comment..