A potential break-up of Costa Coffee and Premier Inn owner Whitbread (WTB) looks possible after US activist hedge fund Elliott Capital Advisors built a 6% stake in the company.

This is the largest single holding in Whitbread, and adds to the pressure to spin off Costa.

Elliott is the second activist investor to take an interest in Whitbread after Sachem Head snapped up a 3.4% stake in December, meaning nearly 10% of its shares are now controlled by investors that are pushing for change.

In the past, Sachem supported a break-up of pharma business Shire (SHP) while Elliott is currently trying to re-shape miner BHP Billiton (BLT).

AJ Bell’s Russ Mould says there is a ‘widely-held belief’ Whitbread should separate Costa Coffee from its Premier Inn division as they are both different businesses and could be worth more as individual entities.

Costa has recently struggled as like-for-like sales dipped 0.1% in its third quarter.

Stockbroker Numis analyst Tim Barratt argues it is difficult to know whether Costa could attract a premium if sold, believing a demerger would be the more straightforward route. (LMJ)

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