Costa coffee firm eyes expansion

Leisure group Whitbread today confirmed a potential expansion to its coffee empire as it revealed takeover talks with central European chain Coffeeheaven International.

Whitbread, which owns the Costa coffee business, said it was in "advanced discussions" over a possible cash offer.

The firm said its bid would be worth 24p per Coffeeheaven share - valuing the company at £32m (€35.3m).

Costa currently has "a handful" of stores in Poland but these are run on a franchise basis.

Whitbread, which also owns Premier Inn budget hotels and a pubs restaurant division, has continued to expand its coffee chain through the recession.

It added 100 new Costa shops in the six months to August 27 this year - bringing the total to nearly 1,000 stores in the UK and more than 400 elsewhere.

The division was said to have produced an "outstanding" performance in that period, with operating profits up 70% to £12.6m (€13.9m), on revenues up 21% to £155.4m (€171.5m).

Coffeeheaven has around 90 sites, mainly in Poland, but also in Czech Republic, Latvia, Bulgaria and Hungary.

The firm, which trades as Coffee Nation in Latvia, is listed in London but based in Warsaw in Poland.

It markets itself as "redefining the central European speciality coffee/sandwich bar market with a level of quality in product and service comparable to similar concepts anywhere in the world".

In the firm's most recent results for the six months to September 30, it said it had a 23% market share in Poland and the country looked to be an "economic out performer" in Europe.

Pre-tax profits before incentive payments were up 181% to £237,880 (€262,586), on group turnover up 16%.

In a statement following press speculation on the issue today, Whitbread said there was "no certainty that an offer will be forthcoming".

Whitbread is set to give an update on more recent trade on Monday.