KKR Reportedly in Talks to Acquire Costa Coffee Amidst Competitive Bidding

KKR, a major American investment firm managing $686 billion in assets, is actively engaged in talks to acquire Costa Coffee from The Coca-Cola Company. This potential acquisition has sparked a 2.3% rise in KKR's stock during premarket trading and highlights KKR's strategic interest in the hospitality sector despite financial challenges such as a low Altman Z-Score indicating distress and declining revenue growth. Costa Coffee, with over 2,000 UK stores and 3,000 globally, is valued at around £1.5 billion—significantly less than the £3.9 billion Coca-Cola paid in 2021—though Coca-Cola may be reluctant to sell at this lower valuation. KKR faces competition from other bidders including Bain Capital and TDR Capital, and the outcome of the auction remains uncertain as KKR's offer details stay fluid, with possibilities of partnering or withdrawing. Coca-Cola intends to retain Costa's ready-to-drink product line sold through other retailers, while Costa's revenues have grown recently but remain below pre-acquisition levels. This acquisition attempt reflects KKR's broader strategy to expand into the hospitality industry amid operational and financial headwinds.