Coca-Cola and Monster Beverage announced Thursday afternoon that Coke will make a net cash payment of $2.15 billion in exchange for a 16.7% stake in Monster. Coke will also gain two seats on Monster's board of directors.
The companies said the deal aims to better-align each of their product portfolio and distribution abilities, and so Coke will transfer ownership of its energy business -- which includes drinks like Full Throttle, Burn and Power Play -- to Monster, while Monster will transfer its non-energy business -- which includes drinks like Hansen’s Natural Sodas, Peace Tea and Hubert’s Lemonade -- to Coca-Cola. Monster will also issue Coke shares of its common stock.
“Our equity investment in Monster is a capital efficient way to bolster our participation in the fast-growing and attractive global energy drinks category," Muhtar Kent, Coca-Cola chairman and CEO, said in a statement Thursday afternoon. Kent went on to add that Monster has been an important part of Coke's global system since 2008, "so we have experienced first-hand Monster’s performance-driven and entrepreneurial culture, proven success in building and extending the Monster brand and their strong product innovation pipeline. We believe this partnership will create compelling and sustainable value for our system and our shareowners.”
For its part, Monster said Thursday that it is especially pleased to get access to Coke's distribution streams, which it called the most powerful and extensive system in the world." Monster chairman and CEO Rodney Sacks noted, "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.”
Hilton Schlosberg, Monster’s president and vice chairman, also said that Monster shareholders will eventually see more cash in their pockets as a result of the deal. "We expect the transaction to significantly accelerate our growth and results of operations internationally, and we plan to review all options available to return a substantial amount of cash to our shareholders,” he said.
Pending customary closing conditions and regulatory approval, the deal is expected to close in late 2014 or early 2015, the companies said.
Following the announcement of Coke's near-17% stake, shares of Monster surged as much as 30% in Thursday's after-hours trading session; the stock is currently up 19%. Coke, meanwhile, improved upon its 0.6% regular-hours gain, rising about 1.3% in after-market trading. On a year-to-date basis, Monster has also posted a better performance: the stock is up more than 6% since the first trading day of 2014 compared to Coke's 1.8% year-to-date decline.
