Coca-Cola buys stake in Monster

DOW JONES
15th August 2014
NEWSWIRES
Coca-Cola Co has agreed to pay $US2.15 billion ($2.31bn) and buy a 16.7 per cent stake in Monster Beverage Corp as part of a deal that combines the companies’ energy drinks and further expands Coke’s reach beyond soda.
Under the deal, Coke will transfer ownership of its energy business, which includes brands like NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless, to Monster. Meanwhile, Monster will transfer its non-energy business, including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products, to Coca-Cola.
Analysts had long considered Monster a potential takeover target and had named Coke as a leading candidate to buy the company. Energy drink sales have been a bright spot in the beverage market, though their sales growth has slowed somewhat in recent quarters.
The move comes as Coke is facing a slowdown in its traditional soft drink market. Worldwide soft drink sales growth is slowing for a third straight year, and Coke’s global volumes fell in the first quarter for the first time since 1999. Carbonated soft drinks still make up more than 70 per cent of its global sales volumes.
As part of the deal, Coke will place two directors on Monster’s board. In addition, Coke will become Monster’s preferred distribution partner globally, and Monster will become Coke’s exclusive energy play.
The companies expect the deal to close late in 2014 or early in 2015.
In after-hours trading, Monster shares jumped 21 per cent, while Coke added 1.4 per cent.
Coke made another big investment earlier this year, taking a 10 per cent stake in Keurig Green Mountain for about $US1.25bn. It also signed a 10-year partnership to sell its drinks through an at-home beverage system being developed by Green Mountain, the maker of the Keurig single-serve coffee maker, that is expected to go on sale in the next year.
The Green Mountain deal gave Coke a big footprint in coffee and tea — beverages that have been growing at a faster clip than soda in recent years as Americans seek more caffeine and warm beverages. Coke later said it would boost its stake in Keurig to 16 per cent.