The Coca-Cola Co., Atlanta, and Monster Beverage Corp., Corona, Calif., have entered into definitive agreements for a long-term strategic partnership that they expect will accelerate growth for both companies in the global energy drink category. In particular, The Coca-Cola Co. will make a net cash payment of $2.15 billion to acquire an approximately 16.7 percent ownership interest in Monster Beverage Corp., pursuant to the terms of the transaction agreements at the closing. The Coca-Cola Co. also will place two directors on Monster’s board of directors.
The new partnership will leverage the respective strengths of The Coca-Cola Co. and Monster Beverage Corp. by exchanging ownership of The Coca-Cola Co.’s worldwide energy business with Monster Beverage Corp.’s non-energy business and shares of Monster common stock. The Coca-Cola Co.’s energy business includes its NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless brands, and Monster’s non-energy business includes its Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s juice products. This exchange will enable the portfolios to benefit from each company’s respective brand marketing, production and distribution strengths and optimize the parties’ capital and resource allocation.
The partnership aligns both companies for the long term by combining the strength of The Coca-Cola Co.’s worldwide bottling system with Monster’s focus and expertise as a leading energy player globally. Additionally, The Coca-Cola Co. and Monster will amend their current distribution agreement in the United States and Canada by expanding into additional territories and entering into long-term agreements. The Coca-Cola Co. will become Monster’s preferred distribution partner globally, and Monster will become The Coca-Cola Co.’s exclusive energy play. These agreements will deliver value to The Coca-Cola Co.’s global system and accelerate Monster’s opportunity to grow internationally, the companies say.
“Our agreement enables us to focus on our core energy business while leveraging the strength of The Coca-Cola Co.’s powerful distribution and bottling system on a worldwide scale,” said Hilton H. Schlosberg, Monster’s vice chairman and president, in a statement. “The goals of both companies’ management teams are further aligned, with a great enhancement to Monster’s position as one of the world’s leading energy beverage companies. 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.”
The transaction, which is expected to close in late 2014 or early 2015, is subject to customary closing conditions, including receipt of regulatory approvals.
“The Coca-Cola Co. continues to identify innovative approaches to partnerships that enable us to stay at the forefront of consumer trends in the beverage industry,” said Muhtar Kent, chairman and chief executive officer of The Coca-Cola Co., in a statement. “Our equity investment in Monster is a capital-efficient way to bolster our participation in the fast-growing and attractive global energy drinks category. 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.
“We are excited to evolve our long-time partnership,” Kent continued. “Monster has been an important part of our 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.”
Rodney C. Sacks, chairman and chief executive officer of Monster, added in a statement: “The transaction announced today represents a unique opportunity for Monster and its shareholders. We gain enhanced access to The Coca-Cola Co.’s distribution system, the most powerful and extensive system in the world. At the same time, we become The Coca-Cola Co.’s exclusive energy play, with a robust portfolio led by our Monster Energy line and The Coca-Cola Co.’s energy brands. Our business will be bolstered by The Coca-Cola Co. 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.”