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Thu 11th Oct 2018 - Whitbread shareholders approve £3.9bn Costa sale to Coca-Cola, Douglas Jack on Revolution
Whitbread shareholders approve £3.9bn Costa sale to Coca-Cola: Whitbread shareholders have overwhelmingly approved the sale of Costa Coffee to Coca-Cola for £3.9bn. At a general meeting yesterday (Wednesday, 10 October), a total of 116,220,495 (99.27%) votes were cast in favour of the deal with just 849,657 (0.73%) against. There were 632,695 votes withheld. Earlier this year, Whitbread announced plans to demerge Costa and list it as a separate entity. But in August Whitbread announced the sale of Costa to Coca-Cola, claiming it was “in the best interest of shareholders”. Whitbread said at the time the sale price represented a multiple of 16.4 times Costa FY18 Ebitda and recognised the “strategic value of Costa’s brand strength, multi-channel presence and international growth potential”. The price was a “substantial premium to the value that would have been created through the previously announced demerger given the Coca-Cola system’s global product, distribution and vending platform”. Proceeds of the deal will be used to pay down debt and boost the pension fund. Whitbread also intends to return a significant majority of net cash proceeds to shareholders and turn its attention to its Premier Inn hotels business. Whitbread acquired Costa in 1995 for £19m from founders Sergio and Bruno Costa when it had only 39 shops. It now has more than 2,400 outlets and is embarking on overseas expansion.

Douglas Jack – time for the execution to start at Revolution Bars Group now the talking is over: Peel Hunt leisure analyst Douglas Jack has said it is “time for the execution to start” at Revolution Bars Group after it ended acquisition talks with The Deltic Group. Issuing an ‘Add’ note on Revolution Bar Group’s shares as it cut the target price to 150p, Jack said: “Terminating discussions means losing potential synergies and scale, which are our reasons for our cutting the target price. The company will have to perform very strongly to recoup this loss of potential shareholder value. It must have convinced some shareholders that it can achieve these performance levels. The first objective must be returning to positive like-for-like sales. The key month is December, which accounts for a quarter of annual profits, with circa 40% of sales being pre-booked. Fortunately, December like-for-like bookings are up 14%. Revolución de Cuba (more than £50,000 average weekly sales) is continuing to outperform Revolution (more than £35,000 average weekly sales). The company targets eventually having 50 Revolución de Cubas and 100 Revolutions, but first it needs to execute on the chief executive’s plans, which include a more premium offering – improved cocktail masterclasses, more entertainment on Friday and Saturday nights, other experiences are to be added, and further improvement in the food menus. Digital-wise this means in-house online table booking, better use of social media, introducing a branded app, and using Reputation.com as a collator of feedback. Then there’s margins with improved price models, energy cost measurement and LED lighting savings, and extracting the potential benefits of the new labour scheduling systems. Elsewhere, the company wants to use the Revolution Card to drive activity and loyalty, better brand partnerships, and a more structured five to six-year investment cycle. The shares currently trade on 3.0 times site level EV/Ebitda, a level from which one would hope downside risk is limited. However, after a torrid 18 months, growth expectations are limited. This has to change – if the talking is over, the execution needs to start.”

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