JPM upgrades Whitbread, says Costa sale underpins Premier Inn equity story
JPMorgan Cazenove upgraded Whitbread to 'overweight' from 'neutral' on Friday and lifted the price target to 5,500p from 4,470p.
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JPM said the sale of the Costa coffee chain to Coca-Cola underpins the Premier Inn equity story.
"We see the significant value unlocked by the Costa deal giving Whitbread interesting optionality," it said.
"We see Premier Inn as a strong format with potential to become a structural winner and to further improve execution with no Costa distraction."
Whitbread announced at the end of August that it had agreed to sell Costa to Coca-Cola for £3.9bn.
The transaction represents an enterprise valuation multiple of 16.4x Costa's FY18 earnings before interest, taxes, depreciation and amortisation and the valuation is significantly higher than is currently reflected for Costa in Whitbread's market value.
Whitbread said at the time that it expects net cash proceeds of around £3.8bn at completion, after adjusting for transaction and separation costs, a "significant majority" of which will be returned to shareholders.
At 1050 BST, the shares were up 1.4% to 4,706p.