Costa Coffee Deal at Crossroads as Coca-Cola Enters Decisive Negotiations with TDR Capital

The fate of Coca-Cola’s Costa Coffee divestment hangs in balance as the beverage corporation enters critical negotiation rounds with private equity firm TDR Capital this weekend. Following TDR’s selection as the preferred buyer earlier in the week, discussions between the two parties have encountered significant obstacles centered on valuation expectations.

Background: How Coca-Cola Ended Up With a Coffee Outlet

The journey began in 2018 when Coca-Cola purchased Costa Coffee from Whitbread for 3.9 billion pounds. The acquisition represented the company’s strategic expansion into the premium coffee segment. However, the coffee chain has faced mounting competitive pressures from niche independent operators and high-street convenience brands like Greggs, prompting the beverage maker to reconsider its portfolio strategy.

Current Sale Process and TDR’s Interest

Coca-Cola is seeking approximately 2 billion pounds for the Costa Coffee business, marking a significant markdown from the original acquisition price. The proposed transaction structure would allow Coca-Cola to maintain a minority equity position, with the possibility of adjusting stake levels to facilitate deal closure.

TDR Capital, which also holds ownership of supermarket chain Asda, is focused on acquiring Costa’s operations across the United Kingdom and international markets, with the China division excluded from the sale. This selective geographic approach reflects the private equity firm’s strategic preferences.

Competitive Bidding and Market Interest

The auction process attracted multiple heavyweight investors initially. Bain Capital’s special situations arm, operating brands like Gail’s and PizzaExpress, competed for the asset. Centurium Capital, owners of China’s Luckin Coffee business, also participated in the bidding rounds. However, prominent private capital operators Apollo and KKR withdrew from contention in recent months, narrowing the field significantly.

Deal Status and Timeline Ahead

Market sources expect a final decision regarding the sale’s continuation or termination to emerge within the coming week. Negotiations are reportedly centered on pricing alignment and shareholding structure. The discussions represent what many consider a final opportunity for both parties to reach mutually acceptable terms before the transaction framework potentially collapses.