NEW YORK Aug 14 Coca-Cola Co. said Thursday it is making a cash payment of $2.15 billion for a 16.7 percent stake in Monster Beverage Corp as the company seeks to expand into faster-growing categories like energy drinks.
Under the agreement, Coke will have two directors on Monster's board. Coke will transfer ownership of its worldwide energy business including NOS, Full Throttle and Burn, to Monster. Monster will issue Coke shares of common stock, and transfer its non-energy business, which includes Hansen's Natural Sodas and Peace Tea, to Coke. Coke will become Monster's preferred distribution partner globally, while Monster will become Coke's exclusive energy drinks partner.
For Coke, the transaction represents an opportunity to increase its footprint in a faster growing category than soda. Coke said last month that its quarterly revenue in North America its biggest market was flat, partly driven by a decline in diet coke sales.
In turn, Monster will gain access to Coke's extensive global distribution system. The companies will amend their current distribution agreement in the U.S. and Canada by expanding into additional territories.
Coca-Cola shares rose 1.2 percent in after-hours trading, while Monster surged 22 percent.
On a conference call with reporters, Coke's Chief Executive Officer Muhtar Kent said the company has the option to increase its stake to 25 percent.
The transaction is expected to close late in 2014 or early in 2015.
"Our equity investment in Monster is a capital-efficient way to bolster our participation in the fast-growing and attractive global energy drinks category," Kent said.
Barclays served as financial advisor and Jones Day served as legal advisor to Monster. Skadden, Arps, Slate, Meagher & Flom LLP advised Coke. (Reporting by Anjali Athavaley; Editing by Jonathan Oatis and Andrew Hay)