Coke chooses caution, sees too much risk in swallowing all of Monster

|By:, SA News Editor

So why didn't Coca-Cola (NYSE:KO) just go all the way and acquire all of Monster Beverage (NASDAQ:MNST) instead of stopping at an asset swap and a 16.7% stake?

More than anything, "it's about protecting the [Coke] brand and the image" from a company that urges consumers to "unleash the beast" with drinks such as Assault and Khaos, said a person close to Coke.

Coke figures it deals with enough controversy from those who blame sugary sodas for obesity and diabetes; it wants to keep at arm's length from the more serious public relations battles facing the energy drinks industry, including an FDA probe over deaths possibly linked to Monster.

On the financial side, the deal involves a reasonable $2.1B cash up front, while a full acquisition would have required at least $12B based on Thursday's closing stock price - roughly equivalent to the amount of cash Coke had on hand at the end of July.

Despite the cautious approach, Coke could still own Monster some day; a standstill agreement limits KO to increasing its stake to 25% over four years, but MNST's board can waive it at any time.