Monster dropped 0.8 percent to $65 in New York after climbing as much as 28 percent, its biggest intraday gain since May 7, 2004. The Corona, California-based company still has risen 41 percent this year.
“At this time, we are not in discussions to acquire the Monster Beverage Corporation,” Atlanta-based Coca-Cola, which has a distribution deal with Monster, said in a statement today. “We continue to review the best ways to maximize the value of our relationship.”
Monster shopped itself to Coca-Cola and PepsiCo Inc. (PEP) a year ago, and both beverage companies passed on an acquisition, citing the cost of a deal, said a person familiar with the matter. A few months ago, Coca-Cola and Monster spoke again about a deal, said the person, who asked not to be named because the talks were private. Coca-Cola again decided Monster was too expensive and pressed to start talks about an expanded partnership that could lead to a small stake sale to Coca-Cola, said the person.
The Journal, citing unidentified people familiar with the situation, reported today that Coca-Cola was in talks to buy Monster and may sell some of its bottling assets to pay for the company. Monster trades at more than 30 times estimated 2012 earnings, and Coca-Cola may not want to pay a large premium for the beverage-maker because the two companies already have a distribution deal, the Journal reported.
Coca-Cola already distributes almost half of Monster’s U.S. volume. Anheuser-Busch InBev NV (ABI) distributes roughly the same amount with a few small distributors making up the balance.
Judy Lin Sfetcu, a spokeswoman for Monster, declined to comment. Peter Land, a PepsiCo spokesman, declined to comment. Kent Landers, a spokesman for Coca-Cola, said the company had no comment beyond the statement.
As of the April 27 close, Monster had a market capitalization of about $11 billion. At that price it would be Coca-Cola’s second-biggest deal after its $12.2 billion acquisition of the North American operations of bottler Coca- Cola Enterprises Inc. in 2010, according to data compiled by Bloomberg.
Monster, which got its start selling juices in the 1930s, had the highest operating margins in the industry as of March and was projected to boost earnings 70 percent in the next three years, analysts’ estimates compiled by Bloomberg showed. U.S. alternative-beverage sales reached almost $32 billion last year, according to estimates by the Beverage Marketing Corp.
Monster Beverage, formerly known as Hansen Natural Corp., sold juices and sodas under the Hansen name before introducing the first Monster Energy products in 2002 to capture growing demand for drinks made with added caffeine or supplements to deliver an energy boost. Monster brands, ranging from coffee- based Java Monster to its Nitrous drink injected with nitrous oxide, now account for about 91 percent of sales, according to the company’s most recent annual statement.
Monster Beverage’s revenue climbed an average of 24 percent in each of the past five years, compared with 15 percent for Coca-Cola and 14 percent for PepsiCo, according to data compiled by Bloomberg. Monster’s operating margin of 27 percent in 2011 was the highest among publicly traded North American soft-drink companies with a market value greater than $500 million, the data show.