The split is expected to happen within two years and will allow shareholders to invest in “two distinct, focused and market-leading businesses” and encourage the two companies to “strengthen the foundations for long-term profitable growth”.
The coffee chain will now be a separate entity from Premier Inn and the Beefeater restaurant outlets.
Adam Crozier, chairman of Whitbread PLC, said: “The Whitbread board has conducted regular and rigorous reviews of its strategy and structure for a number of years. For some time, the board has been of the view that at the right time Premier Inn and Costa should be independent companies. A separation will provide enhanced focus for each business and give shareholders an investment in two high-quality businesses.
“We will ensure that prior to separation each business is sufficiently developed and well-positioned to take advantage of the structural growth opportunities available to them in the UK and internationally. Announcing our intention now provides clarity of our strategic direction to our shareholders, team members and other stakeholders.”