Wagamama owner pulls out of Costa Coffee bid

The private equity firm backing Wagamama has reportedly abandoned its pursuit of Costa Coffee.

According to Sky News, American asset management firm Apollo Global Management, which bought Wagamama’s parent company the Restaurant Group for £506m in 2023, has pulled out of submitting an offer, despite expressing initial interest in the British coffee chain.

The newspaper said there had been fewer proposals than expected, though TDR Capital, which has a controlling stake in the UK arm of fast-growing fried chicken chain Popeyes, is understood to still be in the running, according to sources familiar with the matter.

It was also thought that the Costa deal could be valued at just £1.5b, well under the £3.9b paid by Coca-Cola in 2019.

Last month, it was reported that the Coca-Cola Company was looking to offload Costa, less than seven years after acquiring it from Whitbread, which had owned the brand for almost 25 years.

At the time of the acquisition, which marked the soft drinks firm’s fourth bet on coffee, Coca-Cola said it would enable the business to become a “global coffee platform”.

During a Q2 Coca-Cola earnings call last month, chairman and chief executive James Quincey admitted the investment in Costa was “not where we wanted it to be from an investment hypothesis point of view”.

He said: “I mean, the business is still a good business. But it’s not quite delivered on the different verticals of growth that we were hoping to accelerate much quicker – the ready-to-drink coffee, the Express machines at home – and therefore, the business remains more weighted towards stores. And in the stores, we’ve been driving affordability and actually doing a good job on refreshing the stores and driving speed of service.  But still, the investment hypothesis as originally intended has not played out, despite the improvement in the store business.

“We’re in the mode of reflecting on what we’ve learned, thinking how we might want to find new avenues to grow in the coffee category, while continuing to run the Costa business successfully, because it’s still a lot of money we put down and we want that money to work as hard as possible.”

In October 2024, Costa Coffee posted a pre-tax loss of £9.6m in 2023, a major drop on the £245,950 profit Costa secured in 2022.

Costa Coffee was founded by Italian brothers Sergio and Bruno Costa in 1971. The chain operates around 2,600 cafés in the UK and Northern Ireland and more than 3,900 sites worldwide.

Apollo Global Management has declined to comment.