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Coca-Cola Gulps Down Stake in Monster for $2.2B

Stocks in this article: KO MNST

NEW YORK (The Deal) -- Coca-Cola (KO) said Thursday it will take a 16.7% equity stake in Monster Beverage (MNST) in a $2.15 billion deal that means Monster will become the beverage giant's exclusive offering in the fast-growing energy drinks segment.

The news sent Monster's stock up nearly 20% to $85.35 per share in after hours trading. It closed the day up under 1% to $71.65 giving it a market capitalization of nearly $12 billion.

In addition to a $2.15 billion cash investment, Coca-Cola will transfer its entire energy drink portfolio, which includes NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless over to Monster.

Monster, in turn, will hand over its non-energy brands consisting of Hansen's Natural Soda and juice products, Peace Tea, and Hubert's Lemonade to Coca-Cola.

The Corona, Calif.-based energy drink maker will additionally benefit from Coca-Cola's massive bottling and distribution system globally.

Coca-Cola, of Atlanta, will hold two of Monster's board seats as part of the long-term partnership.

The transaction is expected to close in late 2014 or early 2015 pending regulatory approval.

"We gain enhanced access to The Coca-Cola Company's distribution system, the most powerful and extensive system in the world. At the same time, we become The Coca-Cola Company's exclusive energy play, with a robust portfolio led by our Monster Energy line and The Coca-Cola Company's energy brands. Our business will be bolstered by The Coca-Cola Company energy brands we will acquire, providing us with complementary energy product offerings in many geographies, as well as access to new channels, including vending and specialty accounts," said Rodney Sacks, Monster's CEO and chairman, in a statement.

"Our equity investment in Monster is a capital efficient way to bolster our participation in the fast-growing and attractive global energy drinks category. This long-term partnership aligns us with a leading energy player globally, brings financial benefit to our Company and our bottling partners, and supports broader commercial strategies with our customers to bring total beverage growth opportunities that will also benefit our core business," said Muhtar Kent, CEO and chairman of Coca-Cola, in a statement.

It is the second partnership Coca-Cola has inked this year. In February, the Atlanta-based company gulped down a 10% stake in Keurig Green Mountain Inc. for about $1.25 billion.

The partnership with Keurig Green Mountain was part of a 10-year agreement to develop and sell Coca-Cola's portfolio of brands for use in Keurig Green Mountain's Keurig-branded home appliance for making cold beverages.

Barclays' Wilco Faessen and Christopher Diorio provided financial advice to Monster, while Jones Day's Rob Profusek, Andew Levine, David Wales, Ken Field, Ed Kennedy and Schulte Roth & Zabel LLP's Eric Piesta provided the company with legal advice.

Martha McGarry, Thomas Greenberg and Peter Serating of Skadden, Arps, Slate, Meagher & Flom LLP provided legal advice to Coca-Cola.

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