On the announcement of the deal with UK hospitality leader Whitbread Plc., shares are rising 0.4% as of 9:17 a.m. in New York. The transaction is valued at $5.1 billion.
The move will help Coke's expansion into a new business segment for the soda-focused company, will boost its U.K. presence and take advantage of Costa's international footprint.
"Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand," Coca-Cola CEO James Quincey said in a statement. "Costa gives us access to this market with a strong coffee platform."
Analysts were positive on the move, applauding Quincey for moving aggressively, in contrast to the beverage company's typically slow transition to change.
"We are encouraged by Coca-Cola's aggressive move into the coffee category since James took the CEO helm early last year," RBC analyst Ross MacMillan wrote in a note this morning. "This deal also fills a hole in KO's global portfolio."
While there is concern over the pricing of the deal, which slates the value of Costa at about 16.5 times its operating earnings, MacMillan remained upbeat about the company's foray into the growing coffee industry.
Winners and Losers
The impact of the deal was felt outside of just Coca-Cola, as both coffee and soda competitors, as well as deal partner Whitbread, felt the effects.
An obvious winner is Whitbread, receiving a sweetheart deal for their coffee business and seeing their share price rocket 16% as of 9:23 a.m. in New York.
The deal also takes heat off of the company's management as it alleviates pressure from activist investor Elliott Management.
Meanwhile, Starbucks investors are not as pleased to see such a large company step into the picture as shares have fallen in pre-market trading on the back of the deal's announcement.
As Coca-Cola already has exposure to Dunkin Donuts (DNKN) by bottling its ready-to-drink products, the addition of Starbucks' chief European rival is cause for concern for the company that's already endured a cruel summer.