Costa owner smells coffee with China purchase

By Mark Kleinman, City Editor
Whitbread, the FTSE-100 leisure group, will this week underline its intention to expand its presence in the world's most populous country by taking full control of one of its Chinese joint ventures.
Sky News has learnt that Whitbread, run by Alison Brittain, will announce on Tuesday that it is acquiring a 49% stake in its Costa Coffee partnership in the south of China.
The deal, which is expected to cost a modest sum in the low tens of millions of pounds, will bolster Whitbread's exposure to Shanghai, where Costa already operates nearly 100 stores.Whitbread already owns 51% of the joint venture, and is buying the remaining shares from Yueda, with which it has worked for the last decade.Leisure industry analysts said the deal reflected Whitbread's declared ambition to focus on key international growth opportunities.The company has said that it sees potential for about 700 Costa outlets in China, and is already more than halfway towards that target.Whitbread also has a separate joint venture in the north of China, which covers the Beijing area and is equally owned by the British company and BHG, a local partner.
That deal is unaffected by the buyout of Yueda.Costa has expanded successfully in the UK, with more than 2,000 stores, although analysts at Citi last month downgraded its parent's shares, calling the end of expansion for Costa and rivals such as Caffe Nero and Starbucks.Whitbread has frequently been the subject of break-up speculation, with some investors arguing that it could be worth more split into separate businesses.In addition to Costa and Premier Inn, its operations include Brewers Fayre and Bar & Block steakhouses.Ms Brittain, the highly regarded executive who previously ran the retail operations of Lloyds Banking Group, has said during nearly two years at the helm that the Whitbread board reviews the break-up issue "from time to time".A Whitbread spokeswoman declined to comment on the China deal on Monday.
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