Hospitality giant Whitbread has sold the Costa Coffee chain to Coca-Cola in a £3.9 billion deal.

The British multinational – which owns Premier Inn and numerous restaurant chains – said the deal with the US drinks manufacturer was in the "in the best interests of shareholders".

Whitbread revealed earlier this year that it would split Costa and list it as a separate entity following pressure from activist investor Elliott.

The company said it will use the proceeds from the deal to pay down debt, boost its pension fund and make a significant pay out to shareholders.

It now intends to focus its efforts on its Premier Inn hotels business.

Whitbread chief executive Alison Brittain said: "This transaction is great news for shareholders as it recognises the strategic value we have developed in the Costa brand and its international growth potential, and accelerates the realisation of value for shareholders in cash.

"This combination will ensure new product development, continued growth in the UK and more rapid expansion overseas."

Whitbread acquired Costa in 1995 for £19 million from founders Sergio and Bruno Costa when it had only 39 shops.

It now has more than 2,400 outlets – 17 of which are in Cumbria – and is embarking on overseas expansion.

Coca-Cola boss James Quincey added: "Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.

"Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market through a strong coffee platform."