15 Aug 2014 Coca-Cola buys stake in Monster Beverage for $2bn
Coca-Cola and Monster Beverage have announced that Coke will make a net cash payment of $2.15-billion in exchange for a 16.7% stake in Monster. Coke will also gain two seats on Monster’s board of directors.
The long-anticipated move comes as Coke’s carbonated soft-drink business continues to decline even as Monster’s energy drink business expands. Coke has been under investor pressure to find new growth.
“Coca-Cola certainly needs growth,” says Bill Chappell of SunTrust Robinson Humphrey. “Monster has a leading share in the US energy drink market, and they have been gaining share overseas. It’s a nice shot in the arm for Coca-Cola going forward.”
The companies said the deal aims to better-align each of their product portfolio and distribution abilities, and so Coke will transfer ownership of its energy business — which includes drinks like Full Throttle, Burn and Power Play — to Monster, while Monster will transfer its non-energy business — which includes drinks like Hansen’s Natural Sodas, Peace Tea and Hubert’s Lemonade — to Coca-Cola.
“Our equity investment in Monster is a capital efficient way to bolster our participation in the fast-growing and attractive global energy drinks category,” Muhtar Kent, Coca-Cola chairman and CEO, said in a statement.
Kent went on to add that Monster has been an important part of Coke’s global system since 2008, “so we have experienced first-hand Monster’s performance-driven and entrepreneurial culture, proven success in building and extending the Monster brand and their strong product innovation pipeline. We believe this partnership will create compelling and sustainable value for our system and our shareowners.”
For its part, Monster said that it is especially pleased to get access to Coke’s distribution streams, which it called the most powerful and extensive system in the world.”
Monster chairman and CEO Rodney Sacks (left) noted, “We become The Coca-Cola Company’s exclusive energy play, with a robust portfolio led by our Monster Energy line and The Coca-Cola Company’s energy brands. Our business will be bolstered by The Coca-Cola Company energy brands we will acquire, providing us with complementary energy product offerings in many geographies, as well as access to new channels, including vending and specialty accounts.”
Hilton Schlosberg, Monster’s president and vice chairman, also said that Monster shareholders will eventually see more cash in their pockets as a result of the deal.
“We expect the transaction to significantly accelerate our growth and results of operations internationally, and we plan to review all options available to return a substantial amount of cash to our shareholders,” he said.