Boston, MA 08/15/2014 (wallstreetpr) – Developer of non-carbonated ready-to-drink fruit beverages, Monster Beverage Corp (NASDAQ:MNST) and the owner of over 500 brands of non-alcoholic beverages, The Coca-Cola Company (NYSE:KO) have struck a deal whereby Monster would become the Coca-Cola’s exclusive energy play.
Distribution Arrangement
As part of the agreement, both the companies would make changes to their existing distribution arrangement in the U.S., as well as, Canada through the expansion of additional territories and by striking long-term deals. Accordingly, the Coca-Cola would be the preferred distribution partner for Monster worldwide while Monster Beverage Corp (NASDAQ:MNST) would be the exclusive energy play for the Coca-Cola. The deals between the two companies would deliver continuous value to the Coca-Cola’s worldwide system and fasten Monster’s chances to grow globally.
Exchange of Business
The agreement between the two companies allows net cash payment of $2.15 billion by the Coca-Cola Company (NYSE:KO) to Monster, which will get global energy business. In return, the Coca-Cola would get non-energy business and Monster shares apart from striking expanded distribution deals. The companies expect the transaction to close towards the end of the current year 2014 or early next year, subject to closing conditions and regulatory approvals.
The Coca-Cola Company will have about 16.7% of the stake in Monster Beverage after the latter issues shares that will have the potential to increase the outstanding shares.
Benefits
Both the companies are bound to benefit from each others strengths or strongholds. The deal would allow them to align their product portfolios optimally so as to get the advantages of each others brand marketing and distribution strengths. These apart, the companies would witness optimization of their capital and allocation of resources.
Management Speaks
The Coca-Cola Company (NYSE:KO)’s chairman and CEO, Muhtar Kent, said that his company would continue to identify pioneering initiatives for alliance with the aim of staying at the forefront of its consumer trends. He added that he believed that the alliance would create continuous value to its shareholders and to its system.
