Speculation has been brewing over what will happen to Whitbread (WTB) following the agreed sale of Costa Coffee to Coca-Cola for £3.9bn.

Coca-Cola is buying Costa to develop the coffee chain and make cold-brew and ready-to-drink coffee products under a strong global brand.

Canaccord Genuity analyst Nigel Parson believes this potentially signals ‘the beginning of the end’ for Whitbread, claiming its other core brand, hotel chain Premier Inn, should not exist in isolation and should be taken over by rivals.

Parson argues competitors such as Holiday Inn-owner InterContinental Hotels (IHG), Marriott and Accor could work with a property investor to split the property from its operations.

Without Costa, Whitbread would own Premier Inn, along with pub and restaurant chains Brewers Fayre, Beefeater, Bar + Block, Table Table, and in-house restaurant Thyme.

Whitbread is expected to use the proceeds from selling Costa to return cash to shareholders, cut debt and boost the pension fund.

Numis analyst Tim Barratt notes Premier Inn is gaining positive momentum with trading improving in London.

‘We expect the potential for further corporate activity to underpin a premium valuation for the hotel business,’ comments Barratt. (LMJ)

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