Coca-Cola Snares A Minor Stake In Monster Beverages
Coca-Cola Snares A Minor Stake In Monster Beverages
For those analysts egging Coca-Cola to acquire Monster Beverage, a victory of sorts is close at hand. Coca-Cola Company has acquired a stake in Monster Beverage which is an energy drink company. Highly decaffeinated beverages are a big hit in the market and Coca-Cola is just making the move to access this rapidly growing niche of consumers. Falling soda sales are taking the fizz out of Coca-Cola which is now seeking to connect with a younger generation of customers who put their money where their mouth is.
This deal is not the first of its kind between the 2 companies. Around 2 years ago, a deal was close to finalization but it fizzled out because the 2 firms could not agree on the terms. But this deal has a long-term benefit for Coca-Cola. The company has acquired a 16.7% stake in Monster for a staggering $2.15 billion.
What is unusual about this deal is that it unites the largest soda maker with the biggest energy drink company in the US. “This is a winning move by Coca-Cola and Monster. Investors in the firms have welcomed the deal. Monster Beverages stock was up more than 20% in the trading during the after-hours while shares of Coca-Cola rose more than 1% following the release of this news.
At a conference call by Muhtar Kent who is the CEO and chairman of Coca-Cola, the company declared that it was not only impressed with Monster's performance but also confident that the massive beverage company would only grow from strength to strength. The deal also holds that Coca-Cola may increase the stake in Monster to 25% through open market purchases or negotiated transactions with the firm. Coca-Cola is barred from raising its stake beyond 25% in Monster for a period of 4 years without approval from the latter.
Kent did not elaborate on whether Coca-Cola had made the effort to acquire all of Monster. Rodney C. Sacks who is the CEO of Monster has indicated that the company prides itself on being independent and having fun while growing the brand.
The investment of equity is not the only success story of the relations between the two massive companies. Business deals between the firms including brand-swapping and new partnerships as well as addition of board seats in Monster are other successful plots that will meaningfully enrich the relationship between Coca-Cola and the beverages giant.
In a move that allows Monster to focus on energy drinks, Coca-Cola will transfer ownership of energy-drink brands Mother,Burn, Play, Powerplay, Full Throttle, Relentless and NOS to Monster. Monster in turn is all set to offload its non-energy drink brands namely Peace Tea, Hansen's Juice Products, Hansen's Natural Sodas and Hubert’s Lemonade to Coca-Cola.
Monster will now be issuing new shares to make adjustments for Coca-Cola's investment and Coke will now appoint 2 new members in the company's board. How deep is the tie between the 2 companies? Well there are hidden depths given that Monster s distribution relationship now handled by other partners will be taken by Coca-Cola. Will the 2 prosper as their relationship expands? Given the massive brand recall of Monster, Coca-Cola has just managed to add fizz to its future prospects.
