Costa buys Coffee Nation for £59.5m and plans Express offer

Coffee Nation: sold to Costa

Coffee Nation: sold to Costa

Costa, part of the Whitbread group, has bought Coffee Nation, the UK market leader in self-serve gourmet coffee, for £59.5m.

It plans to launch a new brand, Costa Express, to target the self-serve coffee bar sector.

Coffee Nation provides gourmet coffee via self-service outlets in 900 locations throughout the UK, including Tesco, Welcome Break, and Moto, and has an annual turnover in excess of £20m.

The acquisition gives Costa access to these locations and a growth opportunity in the UK’s emerging self-serve coffee bar sector.

Whitbread said Costa will use the purchase of Coffee Nation to develop Costa Express and is targeting 3,000 bars across the UK over the next five years, in addition to Costa’s growth of its store network.

Commenting on the acquisition, Andy Harrison, chief executive of Whitbread, said: “Customers increasingly want great tasting coffee on the go, which makes the self-serve coffee market very attractive. This acquisition provides an exciting launch pad to develop 3,000 Costa Express bars across the UK, providing an additional growth lever for the Costa brand and making Costa available to more customers in more locations.”

Costa will purchase Coffee Nation from Milestone Capital and Investec Growth & Acquisition Finance and members of the existing management team. Costa is paying £59.5m in cash for the entire issued share capital of Coffee Nation, including the repayment of Coffee Nation’s existing debt.

In March 2008, Milestone led the £24m secondary management buyout of Coffee Nation, backing the existing management team. Investec provided a preferred equity investment of £5.25m in support of its bid.

James Stirling from Investec said: “Since we supported the MBO in 2008, against the backdrop of an uncertain economic environment, Coffee Nation has experienced significant growth in earnings and consolidated its position as the leader in its market segment, confirming the resilience of its business model.”