Whitbread (LON:WTB) has unveiled plans to spin off its Costa Coffee unit, the FTSE 100 group has said. The move was announced alongside the company’s full-year results which showed a rise in revenue and profits.
Whitbread’s share price meanwhile has reacted negatively to the news, having given up 1.03 percent to 4,143.00p as of 10:46 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.72 percent in the red at 7,372.15 points.
Costa Coffee demerger plans
Whitbread announced in a statement this morning that it was ‘committed’ to a demerger of Costa Coffee, arguing that the move would provide “shareholders with investments in two distinct, focused and market-leading businesses”.
“The Whitbread Board has conducted regular and rigorous reviews of its strategy and structure for a number of years,” Whitbread’s chairman Adam Crozier, commented in the statement, adding that “for some time, the Board has been of the view that at the right time Premier Inn and Costa should be independent companies”.
Whitbread’s announcement comes after it recently emerged that a unit of US activist hedge fund Elliott Management had built up a stake in the Costa Coffee and Premier Inn owner and was pushing for a break-up, just a few months after news that Sachem Head, another activist investor, had urged the FTSE 100 group’s management to examine a break-up.
Bloomberg quoted the group’s chief executive Alison Brittain as denying that the intervention of activist investors had changed the board’s thinking on the merits of a demerger, while conceding that they had expedited the company’s announcement.
“We are announcing the plans today because there has been a lot of noise and we wanted to give shareholders clarity on our future plans,” the CEO said on a call with reporters, as quoted by the newswire.
Whitbread results update
Whitbread further updated investors on its full-year performance, reporting a 6.1-percent rise in revenue to £3.3 billion and a five-percent rise in underlying operating profit to £622 million. The FTSE 100 group also hiked its payout to shareholders by 5.6 percent, announcing a dividend of 101p per share.