Shares in soft-drinks group Coca-Cola (KO) were flat today despite reports that a Chinese private equity investment firm was brewing up a deal for its Costa Coffee chain.
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Luckin Link
Reports in the Chinese media suggest that Centurium Capital, which is a major shareholder of Starbucks (SBUX) challenger Luckin Coffee (LKNCY), was evaluating a potential bid for the UK-based group.
The specific structure of the potential deal has yet to be determined, Chinese reports said, and it remains unclear whether Centurium would submit a bid independently or through Luckin Coffee.
According to Chinese sources, discussions are believed to be at an early stage and it is uncertain whether a formal acquisition proposal will be made.
The potential sale has reportedly drawn interest from several buyout firms and strategic investors, with Costa Coffee being valued at around $1.3bn.
Starbucks Pressure
A deal would mark Centurium’s first major investment in Europe and potentially expand Luckin’s footprint into the U.K. That would bring more competition for Starbucks after Luckin and other domestic brands put its sales under pressure in China.
Indeed, Luckin Coffee now runs more shops in China than Starbucks and has won customers through lower prices and frequent discounts. It could carry out similar moves in the U.K., where Costa Coffee has nearly 3,000 stores.
Coca-Cola acquired Costa Coffee in 2019 for £3.9 billion as it sought to expand into a wider range of beverages. However, revenues have remained relatively static since then – see above.
Is KO a Good Stock to Buy Now?
On TipRanks, KO has a Strong Buy consensus based on 14 Buy and 1 Hold ratings. Its highest price target is $85. KO stock’s consensus price target is $79.08, implying a 10.69% upside.
