DealBook: Coke to Buy Stake in Monster Beverage for $2.15 Billion

Photo Monster is issuing new shares to accommodate Coca-Cola's investment.Credit Sam Mircovich/Reuters

For years now, analysts have suggested the Coca-Cola Company should acquire Monster Beverage, the energy drink company.

Access to the fast-growing market for the highly caffeinated beverages would help Coca-Cola offset the slowing growth of soda sales, and connect with a younger generation. Two years ago, the companies almost struck a deal, but could not agree on terms.

Now, Coca-Cola, the biggest soda maker in the world, has finally made its move, announcing on Thursday that it had acquired a 16.7 percent stake in Monster for $2.15 billion.

The equity investment is accompanied by a series of business deals, including the swapping of some brands, new partnerships and the addition of board seats at Monster.

In a bid to let Monster focus on energy drinks, Coca-Cola will transfer ownership of its energy drink brands — NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless — to Monster. In return, Monster will transfer its non-energy drinks brands — Hansen's Natural Sodas, Peace Tea, Hubert's Lemonade and Hansen's Juice Products — to Coca-Cola.

Monster is issuing new shares to accommodate Coca-Cola's investment, and it will allow Coca-Cola to appoint two new members to the company's board.

The deal also involves deeper ties between the two companies. Monster will have access to Coca-Cola's international network of bottling facilities, and Monster will share its expertise in the energy drink business with Coca-Cola.

"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."

Rodney C. Sacks, chief executive of Monster, said: "We gain enhanced access to the Coca-Cola Company's distribution system, the most powerful and extensive system in the world. 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. 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."

Barclays served as financial adviser and Jones Day served as legal adviser to Monster. Skadden, Arps, Slate, Meagher & Flom advised Coca-Cola.

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