Coca-Cola Faces Costly Divestment as Costa Coffee Sale Stalls

A pivotal week lies ahead for Coca-Cola, with the beverage conglomerate engaged in difficult negotiations to offload its Costa Coffee chain. Talks with the sole remaining interested party, private equity firm TDR Capital, have proven challenging. While the company has already settled its leadership succession, the pending sale threatens to result in a substantial financial write-down compared to the original acquisition price.

Beyond the merger and acquisition concerns, Coca-Cola has provided clarity regarding its executive future. The company confirmed that Henrique Braun will assume the CEO role from James Quincey in March 2026. Market observers view this planned transition as a signal of continuity, offering a degree of stability for the shares, which are currently trading at 60.04 euros.

Operationally, the core soft drink business continues to perform significantly better than the coffee segment. Third-quarter results showed organic revenue growth of 6%, underscoring the firm's pricing power even in a challenging economic climate. Furthermore, the quarterly dividend is being paid out today, reinforcing the stock's appeal for income-focused investors.

Stalled Negotiations Over Coffee Chain Valuation

The dominant issue for shareholders remains the precarious sale of the Costa Coffee subsidiary. According to media reports, management held urgent crisis talks over the weekend with TDR Capital in an effort to salvage the deal. TDR represents the last remaining option after other potential buyers, including Apollo and KKR, withdrew from the process.

Should investors sell immediately? Or is it worth buying Coca-Cola?

A significant valuation gap is the central obstacle. Coca-Cola is aiming for proceeds of approximately £2 billion, but the prospective buyer is hesitant to meet that price. Complicating matters further, Coca-Cola prefers to retain a minority stake in the business, whereas TDR is demanding full operational control. A final decision on whether to terminate or conclude negotiations is anticipated this week.

A Strategic Reversal with Billions at Stake

A sale under the current discussed terms would represent a painful admission of a failed strategic acquisition. Coca-Cola purchased Costa Coffee for £3.9 billion as recently as 2018. The potential to recoup barely half of that initial investment highlights the operational difficulties within the division, which recently reported a pre-tax loss of nearly £14 million. The hoped-for synergies have largely failed to materialize, a situation partly attributable to the pandemic.

A successful disposal of Costa—even at a steep book loss—would allow management to refocus entirely on its highly profitable core brands. Should the discussions collapse, however, Coca-Cola would be forced to decide whether to absorb further losses or initiate a rigorous internal restructuring of the coffee unit.