Coca-Cola just agreed to pay a whopping $2.15 billion for just 16.7 percent of Monster’s shares. The move was highly anticipated in the market. It is not the first time that the two companies attempted a deal. Negotiations took place two years ago, but ultimately failed.
Coca-Cola buys Monster stake and the deal comes with plenty of benefits for both companies. Coca-Cola is interested in participating in a market where the younger generation is a main target. For a change, Monster will gain access to Coca-Cola’s extensive bottling infrastructure.
“Our equity investment in Monster is a capital efficient way to bolster our participation in the fast-growing and attractive global energy drinks category,” Coca-Cola’s chief executive, Muhtar Kent, said in a statement. “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.”
There will be a couple of exchanges between Coca-Cola and Monster. From now on, Monster will own Coca-Cola’s brands of energy drinks. Those are NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless. Coca-Cola will obtain Monster’s brands of non-energy drinks – Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products, New York Times explains.
From now on, Coca-Cola will be represented by two new members in Monster’s board as part of the deal.
There was another massive acquisition in the recent period, as Apple decided to buy Beats Electronics for $3 billion.
Coca-Cola buys Monster stake, causing Monster’s share to increase by 20 percent
Following the announcement, Monster’s shares rose by 20 percent, Business Insider notes. Coca-Cola’s shares only rose by 1.4 percent. This is not Coca-Cola’s first acquisition in 2014, as in February the company bought 10 percent of Keurig Green Mountain’s shares.
Diet Coke sales decreased as people became more concerned about health related consequences, Time notes. Soda sales overall do not grow as fast as they used to, New York Times adds.
Beer is on the rise all over the world and particularly in the U.S., as many small breweries opened-up recently. Americans develop an increasing interest in beer variety and soda sales seem to be affected by the new trend. So Coca-Cola buys Monster stake forced by external factors, as well as by an inherent need to expand the business.