Image: Whitbread Image: Whitbread
Whitbread is bowing to investor pressure to spin-off its Costa Coffee subsidiary within two years.

When you think of Whitbread what do you think of? There is a good chance its beer. There is a good reason for that. The company was founded in 1742 when Samual Whitbread teamed up with Godfrey and Thomas Shewell and bought a brewery.

One hundred and fifty nine years later, it sold its brewery business.

These days it owns Premier Inns, Beefeater and Brewer's Fayre pub-restaurant chains.

And it also owns Costa Coffee. A company that makes 600 cups of coffee a minute.

But Whitbread is a company which has a track record for selling subsidiaries - David Lloyd Leisure, for example and Marriott Hotels, TGI Fridays and Pizza Hut.

Within the UK, however, it is a phenomenon. Of its 3,401 stores worldwide, 2,121 are in the UK.

Whitbread has owned Costa Coffee since 1995, but ever since active investors Elliott Advisors and Sachem Head bought stakes in the company a few months ago, speculation has increased that they will sell-off the rapidly growing subsidiary.

Earlier this year, Barclays Capital argued that the sum of the parts that make-up Whitbread would be greater than the value of the company.

Whitbread itself has argued that the Costa Coffee business needs more capital to continue growing, and that it needs Whitbread’s deep pockets to realise potential.

Well, that may or may not be right, but the company has now bowed to shareholder pressure and revealed it is going to sell the Whitbread subsidiary within two years.

Whitbread chairman Adam Crozier said: “We will ensure prior to separation each business is sufficiently developed and well-positioned.”

Alison Brittain, Whitbread’s chief executive said: "We are confident that both Premier Inn and Costa will soon be businesses of sufficient strength, scale and capability to enable them to thrive as independent companies.

"The board, therefore, believes that it is in the best long-term interest of Whitbread's many stakeholders to separate Premier Inn and Costa, via a demerger of Costa.

"The management team and I are excited that the strategy we are executing will give us the opportunity to create two high-quality independent businesses that will create long-term value for our stakeholders."