Coca-Cola Halts Costa Coffee Divestment Amid Valuation Concerns

Coca-Cola US1912161007

Coca-Cola has suspended its plans to divest the British coffee chain Costa Coffee. According to reports, the auction process failed because bids from interested parties fell significantly short of the company's valuation expectations. Rather than accept a sale at a deep discount, the beverage giant will retain the unit within its portfolio. However, the long-term strategic direction for this underperforming asset remains unclear.

Despite the collapsed sale and Costa's operational difficulties, the market response has been muted. Coca-Cola shares are currently trading at $71.24, placing them within striking distance of a recently achieved 52-week high.

Analysts are maintaining a positive outlook, focusing on the strength of the core beverage business. Experts at RBC Capital and Bank of America have reaffirmed their buy ratings, with price targets of $78 and $85, respectively. The decision to walk away from a lowball offer is widely viewed by market observers as a disciplined move in capital allocation. This confidence is further supported by the company's solid third-quarter 2025 revenue growth of 5.4%.

A Deal Stalled by a Valuation Gap

The primary reason for halting the sale appears to be a lack of buyer willingness to meet Coca-Cola's price expectations. Negotiations with major private equity firms, including TDR Capital, Bain Capital, Apollo, and KKR, were terminated after their offers failed to reflect the strategic value assigned to the business.

The financials highlight the dilemma. Coca-Cola originally acquired Costa Coffee in 2018 for $5.1 billion. For this latest sales process, the targeted proceeds were reportedly around $2.5 billion. The fact that bidders were unwilling to meet even this substantially reduced figure points to skepticism regarding the chain's business performance, which recently posted an operating loss of £13.5 million. By stopping the sale, management avoids crystallizing a major book loss.

Upcoming Financial Events in Focus

Investor attention is now shifting to upcoming financial disclosures. Coca-Cola is scheduled to release its fourth-quarter and full-year 2025 results before the market opens on February 10, 2026.

Significant interest is also anticipated for the appearance of designated CEO Henrique Braun at the CAGNY conference on February 17. Market participants expect him to outline concrete plans for either restructuring or further integrating the Costa Coffee business.