Monster Beverage (MNST) to Sell 16.7 Percent Stake to Coca-Cola (KO)

Shares of Monster Beverage Corporation (MNST) were trading up +15.35 or +21.42 percent to $87.00 per share in this morning's premarket, after news that Coca-Cola (KO) was entering into a strategic partnership with the company by purchasing a 16.7 percent stake in Monster. Monster Beverage stock closed at $71.65, up +0.50 or +0.70 percent in Thursday's regular trading session.

Corona, California based Monster Beverage Corporation is a major producer of energy drinks, fruit drinks and natural soft drinks.
Its best known brands include the Monster Energy drink, Hansen's Natural Soda, Hansen's Junior Juice, Hansen's Energy, Hubert's Lemonade, Blue Sky and Peace Tea. Monster Beverage accounted for more than 35 percent of the domestic energy drink market in 2012 and had net income of +$338 million on $2.24 billion in revenue last year.

The deal announced late Thursday, will have the Coca-Cola Company pay $2.15 billion in cash for a 16.7 percent stake in Monster Beverage Corp. The agreement will include Coca-Cola appointing two directors to the Monster board.

Coca-Cola will also transfer ownership of all of its worldwide energy brands, which include Burn and Full Throttle to Monster Beverage. In exchange, Monster will transfer all of its non-energy drink brands, such as Hansen's Natural Soda and Peace Tea to Coca-Cola. Monster will be Coca-Cola's preferred partner in global distribution, while Coca-Cola will distribute Monster Energy drinks exclusively.

Chairman and Chief Executive Officer of Monster, Rodney C. Sacks stated in the company's press release that, "The transaction announced today represents a unique opportunity for Monster and its shareholders, we gain enhanced access to The Coca-Cola Company's distribution system, the most powerful and extensive system in the world. At the same time, 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".

Chairman and Chief Executive Officer of The Coca-Cola Company, Muhtar Kent said that, "Our equity investment in Monster is a capital efficient way to bolster our participation in the fast growing and attractive global energy drinks category. This long-term partnership aligns us with a leading energy player globally, brings financial benefit to our Company and our bottling partners, and supports broader commercial strategies with our customers to bring total beverage growth opportunities that will also benefit our core business."

Under the agreement, Coca-Cola will have the right to purchase up to 25 percent of Monster Beverage upon approval by the Monster board of directors. The stake in Monster is part of an overall strategy by Coca-Cola to expand into energy and natural drinks as people's habits tend to favor healthier choices. Coca-Cola increased their stake in Keurig Green Mountain (GMCR) to 16 percent in May, becoming the coffee company's biggest shareholder.
Monster Beverage stock will open at a new all-time high this morning. The stock's price has steadily increased since trading in the low 50s in September of 2013. As the new partnership with Coca-Cola gains stockholder and investor approval, the stock could continue to appreciate significantly.

Other News about Monster Beverage Corporation
Two Monster Billionaires Emerge From Coca-Cola's $2B Energy Drink Deal
Monster CEO and President each own more than 18 million shares of Monster.
Company reported adjusted earnings of $0.81 per share in the second quarter.

Other Stocks in the News
According to some analysts, company's valuation of $33 billion is unjustified.
Both companies win key regulatory approvals from the CDC and FDA.

Published on Aug 15, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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