Whitbread have confirmed it will sell off their Costa Coffee empire to the Coca-Cola company in a deal valued at £3.9b.
Agreed unanimously by the Whitbread board, the deal is worth 16.4 times the Costa's EBITDA for 2018. When the company acquired the chain in 1995 it held just 39 outlets and was valued at £19m.
The sale marks Coca-Cola's first foray into the global hot drink sector.
Private equity groups were already known to have been circling Costa Coffee after Whitbread announced it would be spun off from its hotel business in April. The move was reportedly urged by the company's largest investor Elliott Advisors.
Those believed to have approached Whitbread regarding a buyout of the firm at the time included Bain Capital, CVC and TPG.
Alison Brittain, Whitbread chief executive, said: "I am delighted that we have agreed the sale of Costa to Coca-Cola for £3.9b. This transaction is great news for shareholders as it recognises the strategic value we have developed in the Costa brand and its international growth potential and accelerates the realisation of value for shareholders in cash.
"The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders.
"Whitbread will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn."
In a statement James Quincey, Coca-Cola president and CEO, said the expansion gave the soft drink company "new capabilities and expertise in coffee" and that their system could "create opportunities to grow the Costa brand worldwide".
He added: "Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand.
"Costa gives us access to this market through a strong coffee platform. I'd like to welcome the team to Coca-Cola and look forward to working with them."