The Coca­Cola Co.’s share price up, acquires a 17% stake in Monster Beverage

The biggest beverage company in the world – The Coca­Cola Co. revealed in a statement that it agreed to exchange some brands and acquire a 17% stake in Monster Beverage Corp. The price of the deal is estimated to about 2.15 billion dollars. Under the terms of the contract, The Coca-Cola Co. gets the right to acquire as much as a 25% stake in Monster, but such an investment

would have to receive the approval of Monsters board of directors. Monster Beverage Corp. is the second­largest energy­drink manufacturer in the country. It
reported a 9% revenue increase last year to 2.2 billion dollars. The company has been long considered a potential acquisition goal by analysts, who also believed that The Coca­Cola Co. is the most logical candidate to take over the company.

Mr. Muhtar Kent, who currently occupies the position of a Chief Executive Officer of The Coca- Cola Co., commented on the deal in a statement, which was cited by the Financial Times: “Coca- Cola continues to identify innovative approaches to partnerships that enable us to stay at the forefront of consumer trends in the beverage industry.” Mr. Kent added: “Our equity investment in

Monster is a capital­efficient way to bolster our participation in the fast­growing and attractive global energy drinks category. We believe this partnership will create compelling and sustainable value for our system and our shareowners.”

This step is part of the strategy of The Coca­Cola Co. to increase its presence on the flourishing market of energy drinks, especially at a time when the company has reported a slowdown of its global soda sales for a third consecutive year.

In addition, it is part of the deal that will include an asset swap between the companies. The Coca­Cola Co. is to transfer its energy drinks NOS, Full Throttle, Burn, Mother and Play to Monster, while the latter is to shift its Hansen’s natural sodas and juices, Peace tea and Hubert’s lemonade to The Coca­Cola Co.

One of the analysts, who workd at Sanford Bernstein – Mr. Ali Dibadj commented on the deal for the Financial Times: “This is a very smart move by Coca­Cola, giving it critical exposure in the energy drinks sector which has been growing at an extremely rapid rate, particularly outside the US.”

The acquisition is considered to correspond to the strategy of The Coca­Cola Co. of purchasing equity stakes in promising new brands and technologies.

The Coca­Cola Co. was 0.60% up to close at 40.18 dollars per share yesterday, marking a one-year change of +2.79%. According to the information published on CNN Money, the 19 analysts offering 12­month price forecasts for The Coca­Cola Co. have a median target of 45.00, with a high estimate of 53.00 and a low estimate of 42.00. increase from the last price of 40.18.