Costa owner Whitbread rises on break-up talk following Elliott stake disclosure
Costa is thought to be worth between £2bn and £3bn.
Shares in Whitbread rocketed on Monday after activist investor Elliott revealed it has become the firm’s largest shareholder, with pressure expected to be applied to break up the Costa Coffee and Premier Inn owner.
Elliott now owns over 6% of Whitbread, the firm confirmed on Saturday, and it is understood that it will now push for Costa and Premier Inn to become two separate listed entities.
Costa is thought to be worth between £2 billion and £3 billion while Premier Inn is valued at up to £8 billion.
Shares in Whitbread rocketed over 7% on news of Elliott’s involvement.
Elliott, which has a reputation for corporate activism, is understood to consider the pairing of Costa and Premier Inn under Whitbread to be an anomaly with no synergies.
It is not the first time Whitbread has been targeted by an activist.
US hedge fund Sachem Head owns a 3.4% stake in the firm and is also thought to be pushing for a separation of the two brands.
Analysts said that the positions taken by the duo piles further pressure on Whitbread boss Alison Brittain.
David Madden, market analyst at CMC Markets, said: “Whitbread shares are in demand after the activist investor Elliott Advisors stated they now own more than 6% of the company – making them the single largest shareholder.
“The investment company is pushing for a demerger of the group, so Costa Coffee and Premier Inn would be two separate companies.
“Calls to break up the business are not new: US hedge fund Sachem Head own a 3.4% stake in the firm and is also keen to separate the two brands.
“Some investors believe extra value could be created should the demerger go ahead, and now the onus will be on the board of directors to offer an alternative to the proposed demerger plans.”
Ms Brittain has previously said she remains “entirely open-minded about the structure of the business” and that she is committed to reviewing it on a “regular basis” at board level.
Whitbread has a history dating back to 1742 and has over the years owned a bevvy of well-known brands such TGI Fridays, Pizza Hut and Marriott Hotels.
The firm is valued at £7.7 billion and employs 50,000 people.
Costa, which Whitbread acquired in 1995 from founders Sergio and Bruno Costa, has over 2,400 stores and is embarking on overseas expansion.
All parties declined to comment.