Coca-cola has just agreed to buy U.K. coffee shop leader Costa for $5.1 billion.
Costa Coffee Ltd is currently owned by FTSE 100 company Whitbread PLC and the firm has seen a huge increase in price following the announcement. The group bought Costa in 1995 for £19m when it had 39 shops. It now has almost 4,000 shops in 32 countries
Whitbread shares rose more than 17% in early Friday trading and everyone is now expecting the opening of the U.S. markets to see how Coca-Cola (KO) will react.
James Quincey, Coca-Cola president and chief executive, said Costa would give the company “new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide”.
Costa, with Coca-Cola’s backing is now aiming to challenge Starbucks to become the leading hot beverage company in the world.
Looking at the technicals, owning shares in Quincey’s company seems very opportune at the moment with various indicators pointing towards the ‘buy’ signal.
Support level seems to be around $44.50 level which is not expected to be broken and hence provide an upswing for the share price.
What is your view?