Coca-Cola to Gain Monster Beverage Stake in $2.15 Billion Deal
2014-08-15 04:01:00.9 GMT
By Duane D. Stanford
Aug. 15 (Bloomberg) -- Coca-Cola Co., the world’s largest
beverage company, agreed to swap some brands and buy a 17
percent stake in Monster Beverage Corp. for about $2.15 billion,
increasing its bet on the burgeoning energy-drink market.
The move is part of a deal that will include the transfer
of Coca-Cola’s energy drinks NOS, Full Throttle, Burn, Mother
and Play to Monster, according to a statement yesterday.
Monster, meanwhile, will shift Hansen’s natural sodas and
juices, Peace tea and Hubert’s lemonade to Atlanta-based Coca-
Cola.
Under the agreement, the two companies will share
marketing, production and distribution. Coca-Cola, which already
distributes Monster in the U.S. and Canada, will expand the
arrangement globally, helping the energy brand grow overseas.
“It gives them exposure to one of the fastest-growing
segments of carbonated soft drinks globally,” said Ali Dibadj,
a New York-based analyst at Sanford C. Bernstein & Co. “The
category’s growth is clearly slowing in the U.S., but the
potential is very strong globally.”
Monster rose 22 percent to $87.50 at 6:13 p.m. in late
trading yesterday in New York. Coca-Cola gained 1.3 percent to
$40.72 in late trading.
The energy-drink maker will look to transfer all of its
U.S. and Canada distribution to Coca-Cola, Monster Chief
Executive Officer Rodney Sacks said during a media call. Coke
and Leuven, Belgium-based Anheuser-Busch InBev NV share
distribution in the two countries.
Larger Stake
Coca-Cola has the right to purchase as much as 25 percent
of Monster, whose directors would have to approve any larger
investment.
“There is always an opportunity on a mutually agreeable
negotiated basis to go further,” Sacks said. “What will be
will be will be. We are happy running it.”
The investment fits into Coca-Cola’s strategy of taking
equity stakes in promising new brands and technologies,
especially as its main source of revenue is under threat from a
shift to healthier habits. In May, Coca-Cola said it would boost
its stake in Keurig Green Mountain Inc. to 16 percent, making it
the coffee brewer’s largest shareholder.
“There is a pattern here, and this is what we are talking
about in terms of a different approach to innovative
partnerships,” Coca-Cola CEO Muhtar Kent said during the media
call. “We look at deploying capital in an intelligent and
efficient manner to get us a very important footprint in growth
categories.”
Board Members
Coca-Cola also will add two directors to the board of
Corona, California-based Monster.
While Coca-Cola has helped distribute Monster since 2008
and owns smaller brands such as Full Throttle and NOS, it
doesn’t have its own major energy drink. Monster and Red Bull,
owned by Austria’s Red Bull GmbH, have the largest share of the
market worldwide, according to Morningstar Inc.
Skadden, Arps, Slate, Meagher & Flom LLP advised Coca-Cola
on the deal. Barclays Plc served as Monster’s financial adviser,
while Jones Day provided legal counsel.
Coca-Cola explored an acquisition of Monster in early 2012,
a person familiar with the matter has said. The talks ended
without a deal because Coca-Cola decided that Monster’s asking
price was too high, according to the person.
Buying a minority stake is less risky, given the recent
moves by U.S. regulators to investigate energy drinks’ caffeine
content, Dibadj said. Coca-Cola may end up buying the rest of
the business once the smoke clears, he said.
Still, it may not have benefited as much by waiting to act,
he said.
“Coca-Cola should have taken this move faster,” Dibadj
said.
For Related News and Information:
Top consumer stories: RTOP <GO>
To contact the reporter on this story:
Duane D. Stanford in Atlanta at +1-404-507-1307 or
dstanford2@bloomberg.net
To contact the editors responsible for this story:
Nick Turner at +1-212-617-6783 or
nturner7@bloomberg.net
Kevin Orland, Ben Livesey
2014-08-15 04:01:00.9 GMT
By Duane D. Stanford
Aug. 15 (Bloomberg) -- Coca-Cola Co., the world’s largest
beverage company, agreed to swap some brands and buy a 17
percent stake in Monster Beverage Corp. for about $2.15 billion,
increasing its bet on the burgeoning energy-drink market.
The move is part of a deal that will include the transfer
of Coca-Cola’s energy drinks NOS, Full Throttle, Burn, Mother
and Play to Monster, according to a statement yesterday.
Monster, meanwhile, will shift Hansen’s natural sodas and
juices, Peace tea and Hubert’s lemonade to Atlanta-based Coca-
Cola.
Under the agreement, the two companies will share
marketing, production and distribution. Coca-Cola, which already
distributes Monster in the U.S. and Canada, will expand the
arrangement globally, helping the energy brand grow overseas.
“It gives them exposure to one of the fastest-growing
segments of carbonated soft drinks globally,” said Ali Dibadj,
a New York-based analyst at Sanford C. Bernstein & Co. “The
category’s growth is clearly slowing in the U.S., but the
potential is very strong globally.”
Monster rose 22 percent to $87.50 at 6:13 p.m. in late
trading yesterday in New York. Coca-Cola gained 1.3 percent to
$40.72 in late trading.
The energy-drink maker will look to transfer all of its
U.S. and Canada distribution to Coca-Cola, Monster Chief
Executive Officer Rodney Sacks said during a media call. Coke
and Leuven, Belgium-based Anheuser-Busch InBev NV share
distribution in the two countries.
Larger Stake
Coca-Cola has the right to purchase as much as 25 percent
of Monster, whose directors would have to approve any larger
investment.
“There is always an opportunity on a mutually agreeable
negotiated basis to go further,” Sacks said. “What will be
will be will be. We are happy running it.”
The investment fits into Coca-Cola’s strategy of taking
equity stakes in promising new brands and technologies,
especially as its main source of revenue is under threat from a
shift to healthier habits. In May, Coca-Cola said it would boost
its stake in Keurig Green Mountain Inc. to 16 percent, making it
the coffee brewer’s largest shareholder.
“There is a pattern here, and this is what we are talking
about in terms of a different approach to innovative
partnerships,” Coca-Cola CEO Muhtar Kent said during the media
call. “We look at deploying capital in an intelligent and
efficient manner to get us a very important footprint in growth
categories.”
Board Members
Coca-Cola also will add two directors to the board of
Corona, California-based Monster.
While Coca-Cola has helped distribute Monster since 2008
and owns smaller brands such as Full Throttle and NOS, it
doesn’t have its own major energy drink. Monster and Red Bull,
owned by Austria’s Red Bull GmbH, have the largest share of the
market worldwide, according to Morningstar Inc.
Skadden, Arps, Slate, Meagher & Flom LLP advised Coca-Cola
on the deal. Barclays Plc served as Monster’s financial adviser,
while Jones Day provided legal counsel.
Coca-Cola explored an acquisition of Monster in early 2012,
a person familiar with the matter has said. The talks ended
without a deal because Coca-Cola decided that Monster’s asking
price was too high, according to the person.
Buying a minority stake is less risky, given the recent
moves by U.S. regulators to investigate energy drinks’ caffeine
content, Dibadj said. Coca-Cola may end up buying the rest of
the business once the smoke clears, he said.
Still, it may not have benefited as much by waiting to act,
he said.
“Coca-Cola should have taken this move faster,” Dibadj
said.
For Related News and Information:
Top consumer stories: RTOP <GO>
To contact the reporter on this story:
Duane D. Stanford in Atlanta at +1-404-507-1307 or
dstanford2@bloomberg.net
To contact the editors responsible for this story:
Nick Turner at +1-212-617-6783 or
nturner7@bloomberg.net
Kevin Orland, Ben Livesey