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Coca-Cola buying 16.7% stake in Monster, transferring businesses

  • Coca-Cola (NYSE:KO) is acquiring a 16.7% stake in Monster Beverage (NASDAQ:MNST) as part of a strategic alliance. Coke will make a $2.15B net cash payment to Monster at the time of the deal's closing, which is expected in late 2014 or early 2015.
  • As part of the deal, Monster will transfer its non-energy businesses to Coke, and "enter into expanded distribution agreements." Monster will transfer its Hansens Natural Sodas, Peace Tea, Huberts Lemonade and Hansens Juice Products brands, among others.
  • At the same time, Coke will "transfer ownership of its worldwide energy business, including NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless," to Monster.
  • Coke will have two directors on Monster's board. The partnership follows Coke's February deal with Keurig Green Mountain. Coke: "Our equity investment in Monster is a capital efficient way to bolster our participation in the fast-growing and attractive global energy drinks category."
  • Monster: "Our agreement enables us to focus on our core energy business, while leveraging the strength of The Coca-Cola Companys powerful distribution and bottling system on a worldwide scale."
  • MNST +25.6% AH.
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Comments (26)
  • Capt Jack Daniels
    , contributor
    Comments (1263) | Send Message
     
    So monster is becoming less diversified and more specialized in taking over Coke's energy products while giving Coke all their non energy type beverages and Coke is getting a 16% stake for 2 billion dollars. Seems like Monster is settling and likely could have gotten more had they stayed independent from Coke.
    14 Aug, 05:04 PM Reply Like
  • psychological-dividends
    , contributor
    Comments (774) | Send Message
     
    Seems like a beverage swap.
    14 Aug, 05:14 PM Reply Like
  • lifeS*X
    , contributor
    Comments (102) | Send Message
     
    Youhouuu I ve been looking for this day since the GMCR/KO deal broke out !!!! I knew it would happen ///// SOOOOO HAPPY to be long HANS...oops sorry i mean MNST for more than ten years now!!!!

     

    KA CHING!!!!

     

    Monster's CEO : GOOD JOB !!!!!
    14 Aug, 05:42 PM Reply Like
  • Long Term Value
    , contributor
    Comments (190) | Send Message
     
    It is good news. Good for both companies. Very pleased.
    14 Aug, 05:58 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3663) | Send Message
     
    I'd say $KO is the clear winner here in terms of which stock benefits more long-term.... Full Throttle and NOS are decent plays though. Probably good for both companies as a whole, but $MNST trades at a massive premium already...
    14 Aug, 06:07 PM Reply Like
  • Long Term Value
    , contributor
    Comments (190) | Send Message
     
    Any idea what MNST will do with the $2 bill cash? They def do not need the money at all. Special dividend maybe? Mnst is a company that throws off so much cash - honestly, an extra 2 billion is an interesting addition.
    14 Aug, 06:10 PM Reply Like
  • Rose_Colored_Glasses
    , contributor
    Comments (954) | Send Message
     
    Good problem to have for sure LTV.
    14 Aug, 09:35 PM Reply Like
  • Michael Bryant
    , contributor
    Comments (5582) | Send Message
     
    Expand.

     

    I think (NYSE:KO) will eventually buy (NASDAQ:MNST) if it is such a great money maker. Why not?
    14 Aug, 10:39 PM Reply Like
  • Long Term Value
    , contributor
    Comments (190) | Send Message
     
    Listened to the call this morning. MNST says the $ will be returned to shareholders, but declined to specify how, when or how much. They acknowledged they really do not need the money to grow as they throw off enuf cash from operations to fund growth.
    15 Aug, 02:21 PM Reply Like
  • poortorich
    , contributor
    Comments (2263) | Send Message
     
    Good news for several reasons
    1) essentially, mnst now has "protection" since any lawsuit, assault on its business is an assault on Ko
    2)Mnst can now truly utilize the Coke freeway. The internatiinal expansion will accelerate
    3)Ko is essentially admitting that they cannot displace MNST. If you cant beat them, then buy them
    4) MNST is giving up products that really did not fit its business
    5) this was not a buyout. As MNST grows even more, the take out price will be even higher. KO may have to pay a heftier premium in the future when it realizes just how good MNST will be to its business.
    14 Aug, 06:12 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (1263) | Send Message
     
    Poor to rich you are wrong about lawsuit protection if anything they are doubling down as they have taken over Coke's energy drinks and gave Coke their non energy drinks. Coke meanwhile had eliminated their exposure to energy lawsuits other than the 16% ownership exposure they have with Monster. If tomorrow the market for energy drinks was to disappear because of some government or health bans Monster would likely face bankruptcy as they have no other division. Monster has all it's eggs in only one energy drink basket. Coke is invested with Monster and will get their 16% portion of profits -- Monster meanwhile gets none of the Coke's profits other than the energy drinks Coke has thrown in the towel and given to Monster. Monster would have been better served had they allowed Coke to keep their energy drinks and instead got shares of Coke.
    14 Aug, 06:17 PM Reply Like
  • Long Term Value
    , contributor
    Comments (190) | Send Message
     
    There is nothing in the litigation that implies the disaster you mention. Arguably, KO would not purchase 2.1 bill of stock if they were worried about lawsuit. So it is reassuring they have done some due diligence.

     

    mNST already has $800+ mill on the balance sheet. Special investor call tomorrow early.
    14 Aug, 06:25 PM Reply Like
  • poortorich
    , contributor
    Comments (2263) | Send Message
     
    Hello Capt
    I could be wrong. But do you think energy drinks will get completely outlawed all around the world at once? Did you know that in the future, international growth will play a increasingly bigger role in growth? Did you know that the caffeine content is not always the same in every country? Did you know the other products MNST is giving up are very marginal products? What if MNST decreases the caffeine content just a little?Did you know that Red Bull essentially had one product before MNST came on the scene? Red Bull came on the scene about 30 years ago.
    If one is held prisoner to lawsuits and threat of lawsuits, one will miss out on many investment opportunities. The legal problems surrounding MNST allowed a great opportunity to buy more shares. In 10 years we will see the outcome of our investment thesis.
    14 Aug, 06:31 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (1263) | Send Message
     
    Had I been Monster I would have preferred some small percentage ownership of Ko flat out for the transfer of the non energy drink products that Monster gave to Coke much like what Coke got from Monster and I would see about working with Coke to do a hybrid super caffeinated Monster Coke drink. They could name it Monster Coke, imagine all the great taste of Coke with 3 times the amount of caffeine and other stimulants.

     

    Or imagine a Smart Monster version of the purified cloud water drink all the benefits of water with the health risks of too much caffeine.
    14 Aug, 06:52 PM Reply Like
  • poortorich
    , contributor
    Comments (2263) | Send Message
     
    Capt

     

    If youve followed mnst long enough you would realize KO was considering buying MNST. Then the whole lawsuit thing came about at which point KO backed out. As Long Term Value alluded to why in the world would you slam down 2 billion if you thought MNST would go out of business? Pehaps Ko wanted to buy the whole thing but MNST management resisted. Its hard to understand Rodney, the ceo sometimes during earnings conferenc call because he speaks too fast,but he aint no dummy. He knows he's got a good thing in MNSt and is not willingly to give it up so easily.
    14 Aug, 06:57 PM Reply Like
  • Yuk Yeung Phelix Lee
    , contributor
    Comments (11) | Send Message
     
    Feels like this is a better deal for KO than MNST? MNST relinquished all non-energy drink brands while KO keeps 1/6 of energy drink ownership through equity. And KO gets cash upfront and future dividends if MNST can consolidate its brands!
    14 Aug, 07:17 PM Reply Like
  • slcUTAH
    , contributor
    Comments (533) | Send Message
     
    This is a very good deal for KO. As stated above in the article Coke receives Monster's Hansens Natural Sodas, Peace Tea, Huberts Lemonade and Hansens Juice Products. As everyone knows by now soda is in decline in the U.S. Soda and energy drinks have a negative sentiment due to health reasons among the general public. KO's "healthier" beverages are doing fine. KO went out and swapped their least "healthier" drinks for Monster's "healthier" drinks. This is where the money will be and it's very good PR. KO arguably is one of the best corporations in the world for marketing products and they will sell a lot of these new products they're getting in return. KO is thinking LONG TERM. As a KO shareholder I like this deal.

     

    Cheers.
    14 Aug, 07:19 PM Reply Like
  • DanoX
    , contributor
    Comments (2668) | Send Message
     
    Corn syrup soda's are in decline, just like bad cheap beer is in decline. But those people who are making a great products are making big profit i.e... Stone, Sam Adams, and Hanger 24.
    14 Aug, 09:11 PM Reply Like
  • lifeS*X
    , contributor
    Comments (102) | Send Message
     
    Energy drinks being banned and MNST going bankrupt ... LOL.

     

    For instance, the beverages the KO has produced for decades have killed (yes killed coz ppl drink/drank it way too much of it and when you see what coke does to rust...hummm imagine within the human system....) millions of people around the world. Not directly (though in some cases too muck caffeine can be fatal) but with countless diseases resulting from consumption of what the KO has produced for decades.

     

    Still KO is the number 1 beverage company in the world.

     

    Being under KO helm, it means that you are under the good grace of one of the most influential person in the US. What's his name again ? His class A stock is worth 200.000 $. And his influence is way BIGGER than any other lobbying group out there willing to ban the energy drinks.

     

    As other ppl mentioned here, this thing looks like KO puts itself in the seat to acquire the company in a few years time as a whole (MSNT) but takes it step by step.

     

    As to which company gets the best part of the deal, no one knows as I am sure there is more to come between these two and there is no point to unwrap all future plans.

     

    But for now, if after hours activity translates into regular trade, MNST is the winner big time.

     

    One comment about CEO RODNEY SACKS : I fully agree with poortorich - true he speaks fast but when you hear /listen to the guy, you hear he is charge and control - pretty reassuring. And i agree that the talks must have been quite epic as he knows the actual value of the company and its potential going forward.
    14 Aug, 07:39 PM Reply Like
  • Long Term Value
    , contributor
    Comments (190) | Send Message
     
    I think the brands KO is buying have been under appreciated and have room to grow.

     

    KOs equity ownership of MNST is also an affirmation of Monster's value. KO could have just bought the brands and not taken an equity stake. This is a good deal for everyone, except maybe BUD who may not be distributing MNST beverages for long.
    14 Aug, 07:59 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (1263) | Send Message
     
    This 2 billion dollar investment stinks of desperation.
    14 Aug, 09:55 PM Reply Like
  • psychological-dividends
    , contributor
    Comments (774) | Send Message
     
    Well, we all know Coke is desperate.
    14 Aug, 11:33 PM Reply Like
  • dectra
    , contributor
    Comments (412) | Send Message
     
    Completly disagree, psy....

     

    KO is diversifying and improving its income stream with this move. Any moves in that direction are a positive.
    15 Aug, 08:40 AM Reply Like
  • psychological-dividends
    , contributor
    Comments (774) | Send Message
     
    I was joking. Sorry.
    15 Aug, 02:15 PM Reply Like
  • user1416
    , contributor
    Comments (321) | Send Message
     
    Not necessarily desperation or an affirmation of MNST. This agreement locks in their distribution rights and also prohibits MNST from partnering with any other energy drink provider. They could have sat back and let it go to someone else. Affirmation will be demonstrated if they exercise their option.

     

    Monster and Green Mountain have been widely publicized but they have been busy with other small acquisitions. Have faith.
    15 Aug, 01:03 AM Reply Like
  • Herbclouds
    , contributor
    Comments (105) | Send Message
     
    Would you look at that Coke is a genius business.

     

    The times are changing, Tesla is popular and people like organic products.

     

    So Coke invests in Monster (A dying energy drink trend company) and gets the right kind of business to ensure growth.
    16 Aug, 08:27 PM Reply Like
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