Coke and Monster announce $2 billion long-term partnership
Global beverage giant the Coca-Cola Company and energy drink company Monster Beverage Corporation (Monster) have announced plans for a long-term strategic partnership, which they said would “accelerate growth” for both companies in the fast-growing global energy drink category.
As part of the agreement, which is expected to close at the end of 2014 or the beginning of 2015 following regulatory approvals, Coca-Cola will acquire an approximately 16.7 per cent minority ownership interest in Monster, at a cost of US$2.15 billion.
Coke to look after non-energy drinks, Monster to take energy drinks
To align product portfolios and enable those portfolios to benefit from each company’s respective strengths, The Coca-Cola Company will transfer ownership of its worldwide energy business, including NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless, to Monster; and Monster will transfer its non-energy business, including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products, to The Coca-Cola Company.
Expanding agreements in US and Canada into new territories
The Coca-Cola Company and Monster will amend their current distribution agreement in the US and Canada by expanding into additional territories and entering into long-term agreements. The Coca-Cola Company will become Monster’s preferred distribution partner globally, and Monster will become The Coca-Cola Company’s exclusive energy play. The Companies said these agreements would deliver sustainable value to The Coca-Cola Company’s global system and accelerate Monster’s opportunity to grow internationally.
“The Coca-Cola Company 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 CEO, The Coca-Cola Company. “Our equity investment in Monster is a capital-efficient way to bolster our participation in the fast-growing and attractive global energy drinks category,” he said.
The Coca-Cola Company (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Led by Coca-Cola, one of the world’s most valuable and recognisable brands, the Company’s portfolio features 17 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade,Minute Maid, Simply, Georgia and Del Valle. Globally, the Coca-Cola Company is the number one provider of sparkling beverages, ready-to-drink coffees, and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries drink its beverages at a rate of 1.9 billion servings a day.
Monster Beverage Corporation, which is based in Corona, California, is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company’s subsidiaries market and distribute energy drinks and alternative beverages including Monster Energy brand energy drinks, Monster Energy Extra Strength Nitrous Technology brand energy drinks, Java Monster brand non-carbonated coffee + energy drinks, X-Presso Monster brand non-carbonated espresso energy drinks, M3 Monster Energy Super Concentrate energy drinks, Monster Rehab non-carbonated energy drinks with electrolytes, Muscle Monster Energy Shakes, Übermonster energy drinks, and Peace Tea iced teas, as well as Hansen’s natural sodas, apple juice and juice blends, multi-vitamin juices, Junior Juice beverages, Blue Sky beverages, Hubert’s Lemonades and PRE Probiotic drinks.
“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,” Mr Kent said.
Mr Kent said Coca-Cola believed the partnership would create “compelling and sustainable value for our system and our shareholders”.
“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,” Mr Kent said.
Coke deal a “unique opportunity” for Monster
Rodney C. Sacks, Chairman and Chief Executive Officer of Monster, said the transaction represented a “unique opportunity” for Monster and its shareholders.
“We gain enhanced access to The Coca-Cola Company’s distribution system, the most powerful and extensive system in the world,” Mr Sacks said. “At the same time, 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,” he said.
“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,” Mr Sacks said.
Hilton H. Schlosberg, Monster’s Vice Chairman and President, said the agreement would enable Monster to focus on its core energy drinks business, while leveraging the strength of the Coca-Cola Company’s powerful distribution and bottling system on a worldwide scale.
“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,” Mr Schlosberg said. “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.
Barclays served as financial advisor and Jones Day served as legal advisor to Monster. Skadden, Arps, Slate, Meagher & Flom LLP advised The Coca-Cola Company.
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