Coca-Cola, Monster ‘Swapping’ Some Brands
The Coca-Cola Co. and Monster Beverage Corp. have entered into definitive agreements for a long-term strategic partnership that is expected to accelerate growth for both companies in the fast-growing, global energy drink category. The deal involves the companies “swapping,” or transferring, some brands.
The companies say the new, innovative partnership leverages the respective strengths of Coca-Cola and Monster to create compelling value for both companies and their shareowners. The partnership strategically aligns both companies for the long term by combining the strength of Coca-Cola’s worldwide bottling system with Monster’s dedicated focus and expertise as a leading energy player globally.
Details of the transactions
Equity investment: In an effort to align long-term interests, Atlanta-based Coca-Cola will acquire an approximately 16.7 percent ownership interest in Corona, Calif.-based Monster (post issuance) and will have two directors on Monster’s board of directors. Coca-Cola expects to account for its investment in Monster under the equity accounting method.
Business transfers: Coca-Cola will transfer ownership of its worldwide energy business, including NOS, Full Throttle, Burn, Mother, Play and Power Play as well as 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 Coca-Cola.
Distribution: Coca-Cola and Monster will amend their current distribution agreement in the U.S. and Canada by expanding into additional territories and entering into long-term agreements. Coca-Cola will become Monster’s preferred distribution partner globally and Monster will become Coca-Cola’s exclusive energy play. These agreements will deliver sustainable value to Coca-Cola’s global system and accelerate Monster’s opportunity to grow internationally.
Pursuant to the terms of the transaction agreements, at the closing, Coca-Cola will make a net cash payment of $2.15 billion and transfer its worldwide energy business to Monster. In exchange, Monster will issue to Coca-Cola the shares of Monster common stock, transfer its non-energy business to Coca-Cola and enter into expanded distribution arrangements. The transaction, which is expected to close late in 2014 or early in 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 CEO of The Coca-Cola Co. “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 longtime partnership,” he added. “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 share-owners.”
Rodney C. Sacks, chairman and CEO of Monster, said, “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.’s 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 H. Schlosberg, Monster’s vice chairman and president, said, “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. 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.”