Monster Beverage Corp's rising revenue makes it desirable target for Coca-Cola- report

January 10
11:35 PM 2014

Monster Beverage Corp may have gone $3 billion more expensive in two years but it is still an ideal target for beverage firms that need to boost its sales, Bloomberg reported. Data gathered by Bloomberg showed that Monster's revenue is increasing faster than every other major soft drink maker in the US. This includes Coca-Cola Co which is set to report its first annual sales decline since the financial crisis. Stifel Financial Corp said the major soda maker could be motivated to bid for Monster in order to give protection to their distribution agreement.

The report said Monster's growth would be an expensive purchase and any potential acquirer would need to consider the risk that comes with investing on energy drinks at a time when US regulators are investigating the health concerns that come with products that are rich in caffeine. The Bank of Montreal, however, has said that even if the $16 billion purchase would be made at a 41% premium, it could still bolster the earnings of Coca-Cola.

In a phone interview with Bloomberg, Edward Jones & Co Analyst Jack Russo said about the possible purchase, "It's going to be an expensive acquisition because of the growth. Certainly any buyer that wants to get into this category has to look at the regulatory environment and see that there are a lot more alarm bells going off about energy drinks. Those two things need to be weighed."

Citing a person familiar with the matter, Coca-Cola looked into a possible acquisition of the energy drinks maker in 2012. The source said that the talks failed since Coca-Cola found Monster's asking price as too high.

From the start of 2012 when Monster was only valued at $8 billion, its market value rose to a high of $13.9 billion in June 2012. Monster had a market value of $11.3 billion yesterday, the report said.

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