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4-Traders Homepage  >  Equities  >  Nyse  >  Coca-Cola Company (The)    KO

COCA-COLA COMPANY (THE) (KO)
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Coke says not in talks to buy Monster Beverage

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05/01/2012 | 01:56am CEST
Chairs with the Coca-Cola logo are pictured in a conference room during a media tour at PT Coca-Cola Amatil Indonesia's factory in Cibitung

(Reuters) - Coca-Cola Co took the unusual step of shooting down a report on Monday that said it was in talks to buy energy drink maker Monster Beverage Corp, valued at more than $11 billion.

The statement from the world's largest soft drink maker came in response to a story in the Wall Street Journal that said Coke was in discussions to buy the fast growing energy drink maker, whose brands include Monster Energy and Java Monster.

Coke and Monster had discussed a possible deal as recently as last year, according to two sources familiar with the matter. However, it is unclear whether the two have been in talks since then.

The Journal's report that the two companies were in current talks, posted on its website Monday, sent Monster's stock up 28 percent to $83.96, an all-time high. Coke later issued a statement disputing the report, and Monster stock fell, closing down 1 percent.

"At this time, we are not in discussions to acquire the Monster Beverage Corp," Coke said in its statement. "We continue to review the best ways to maximize the value of our relationship."

Should it happen, an acquisition would give Coke a bigger footprint in the energy drink market, which is growing faster than traditional soft drinks. Coke's own energy drink, Full Throttle, is small compared with Monster and rivals Red Bull and Rockstar.

"We think Monster is an attractive takeout candidate given it is the fastest-growing brand in one of the fastest-growing global beverage categories," said Stifel Nicolaus analyst Mark Astrachan.

UBS analyst Kaumil Gajrawala estimated a fair takeout offer for Monster would range from $84 to $100 per share. Based on the number of shares outstanding as of February 24, that multiple implies a deal value ranging from $14.6 billion to $17.4 billion.

Coke already distributes a large portion of Monster's drinks in the United States and in some international markets. Monster has a similar distribution deal with Anheuser-Busch InBev.

In its statement, Coke said the two companies were looking at ways to wring more profit out of their existing relationship. That could include placing Monster in more retail locations, doing additional co-marketing with other Coke brands, or working together to market new products, according to Ken Harris, chief executive of Kantar Retail Americas Consulting.

However, the dueling statements on a possible acquisition left some doubt about whether a deal might be in the works.

Following Coke's denial of acquisition talks, the Wall Street Journal updated its story to say the companies had been in talks recently and that Coke pulled out after the Journal report was published.

A Coke spokesman denied that claim.

A Monster spokeswoman said the company does not comment on market speculation.

INTERNATIONAL OPPORTUNITY

Monster Beverage, earlier known as Hansen Natural, was taken public by current CEO Rodney Sacks in 1992. Sacks, now in his 60s, still has a 7.3 percent stake in the company, according to Thomson Reuters data.

Speculation about whether Coca-Cola would buy Monster has surfaced in the past due to Monster's growth, the companies' distribution relationship, and the fact that Coke does not have a very strong-selling energy drink.

Last year, Monster's sales rose by nearly a third to $1.70 billion. Sales are seen rising a further 21 percent this year.

For Monster, getting bought by Coca-Cola would greatly expand its presence, since it would have access to Coke's sizable international distribution system. For Coke, buying Monster would give it the full profit stream from the product.

Analysts have said buying Monster would give Coke a good brand in North America, where sales of traditional soft drinks have been weak, as well as a good product to sell overseas.

Monster's shares nearly doubled over the past year. As of Friday's close, the company's market capitalization was about $11.4 billion based on the latest number of share outstanding.

Monster shares closed down 0.8 percent at $65. Coke shares closed down 0.4 percent at $76.32 on the New York Stock Exchange.

(Reporting by Martinne Geller, Michael Erman and Soyoung Kim in New York and Mihir Dalal in Bangalore; Editing by Alwyn Scott, Phil Berlowitz, Bob Burgdorfer and Bernard Orr)

By Martinne Geller and Michael Erman

Stocks treated in this article : AB INBEV, BEAM Inc, The Coca-Cola Company, Monster Beverage Corp
Stocks mentioned in the article
ChangeLast1st jan.
COCA-COLA COMPANY (THE) -0.82% 44.3 Delayed Quote.-2.62%
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Financials ($)
Sales 2018 31 515 M
EBIT 2018 11 332 M
Net income 2018 8 990 M
Debt 2018 28 667 M
Yield 2018 3,55%
P/E ratio 2018 21,59
P/E ratio 2019 19,92
EV / Sales 2018 6,93x
EV / Sales 2019 6,66x
Capitalization 190 B
Chart COCA-COLA COMPANY (THE)
Duration : Period :
Coca-Cola Company (The) Technical Analysis Chart | KO | US1912161007 | 4-Traders
Technical analysis trends COCA-COLA COMPANY (THE)
Short TermMid-TermLong Term
TrendsBullishNeutralBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 26
Average target price 50,0 $
Spread / Average Target 12%
EPS Revisions
Managers
NameTitle
James Quincey President, Chief Executive Officer & Director
Ahmet Muhtar Kent Chairman
Kathy N. Waller CFO, President-Enabling Services & Executive VP
Eddie R. Hays Chief Technical Officer & Senior Vice President
Barry N. Simpson Chief Information Officer & Senior Vice President
Sector and Competitors
1st jan.Capitalization (M$)
COCA-COLA COMPANY (THE)-2.62%189 813
DR PEPPER SNAPPLE GROUP24.33%21 562
SUNTORY BEVERAGE & FOOD LTD7.77%15 560
COCA COLA HBC AG3.93%13 176
ARCA CONTINENTAL SAB DE CV-1.56%12 777
TINGYI (CAYMAN ISLANDS) HOLDING CORP.7.37%11 706