And that time may be fast approaching, after the energy drinks maker company hit an all-time last week. Coca-Cola, the Atlanta-based beverage giant, has a 16.7% stake in Monster. Couple that with an aging management team, a small pool of potential acquirers and Coke's recent sheepishness to do deals and you have a real cocktail for a deal.
It is "a good time to sell, regardless," citing favorable market conditions, said one industry banker who spoke to TheStreet's sister publication The Deal under the condition of anonymity on Friday, Sept. 1. A Coca-Cola acquisition of Monster "would be the logical next step for both companies," added the industry banker.
Having already established a stake in the company, Coke seems to be the most logical suitor for Monster, given both companies' size. Coca-Cola has a market cap of $195.22 billion, compared to Monster's $31.86 billion. The only Coca-Cola rival that could possibly acquire Monster is PepsiCo Inc. (PEP) , which has a market cap of $165.05 billion.
Still, the industry banker said it appears that Monster already settled on Coca-Cola as its suitor. The 16.7% stake the company purchased a few years ago was likely the largest position it could get out of Monster at the time. To complete its acquisition of Monster will likely be an easy deal for Coca-Cola to hash out and the company will probably use a combination of cash and stock to do it.
"It seems Monster has made its bed and decided Coca-Cola is the way to go," the source said.
Sure, the market is right for a deal, but timing may also play into the hand of Monster's directors, as well.
The majority of Monster's 10-member board of directors are above the age of 60, ideal retirement age, and have sat in leadership positions at the company since the 1990s. The two oldest directors, Harold Taber, 78, and Sydney Selati, 78, were appointed to the board in 1992 and 2004, respectively. Interestingly, Taber held various executive positions at the Coca-Cola Bottling Company of Los Angeles from 1976 to 1987, according to Morningstar Inc.
Hilton Schlosberg, 64, has been Monster's vice chairman of the board, chief operating officer, secretary and director since 1990. In July 1996, he tacked on the position of chief financial officer, a title he has retained. Karen Waller, 58, and Mark Hall, 60, are the only two board members that were appointed recently, in 2015 and 2014, respectively.
However, Hall has served in various executive roles at Monster since 1997, including as chief marketing officer. Waller hails from Coca-Cola. Waller has been Coca-Cola's executive vice president and chief financial officer since 2014 and has been with the company since 1987, according to Morningstar.
Under the relatively new leadership of Coca-Cola CEO James Quincey (he took the helm on May replacing former CEO Muhtar Kent), Wall Street has been anxiously awaiting the beverage giant to announce a deal. Quincey previously served as Coca-Cola's chief operating officer.
Coke will be "very focused on expanding in other categories that are attractive to us" and sees "tremendous opportunity" to grow the Coca-Cola brand, Quincey said on an earnings call with the media in April. He has also been pushing a campaign aimed at getting Coca-Cola back to a "total beverage company."
Given its stretch of sluggish results, Coca-Cola could benefit from sprucing up its portfolio of brands, which already is inclusive of water (Smartwater, Dasani), juice (Simply Orange, Minute Maid) and soda (Coca-Cola, Sprite).
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As of 2015, Coca-Cola held a 17.4% share of the global sports and energy drinks market, one spot from the top under PepsiCo, which held 29.3%, in part due to the dominance of the Gatorade brand. Monster ranked fourth with 5.9% of the market share in the sports and energy space, under rival Red Bull GmbH, third, with 6.7% of the share, according to Statista data. Combine Coca-Cola and Monster and they can edge PepsiCo out of the dominant seat within the important space.
When Coca-Cola took its 16.7% position in Monster, it transferred its own energy drinks, including NOS, Full Throttle, Burn, Samurai and Nalu, to Monster. The energy drinks maker then transferred its non-energy beverages, such as Hansen's Juice Products and Peace Tea, to Coca-Cola. Coke tapped Skadden, Arps, Slate, Meagher & Flom LLP and Cleary Gottlieb Steen & Hamilton LLP for legal counsel. Monster tapped Barclays plc's Wilco Faessen and Chris DiOrio for financial advice on the initial deal and Schulte Roth & Zabel LLP and Jones Day for legal advice.
Shares of Monster reached an all-time high of $56.44 on Thursday, Aug. 31.
"Could this be $KO beefing up its beverage business?", tweeted Jim Cramer, founder of TheStreet, just after the Corona, Calif. company hit its all-time high.
Monster did not return a request for comment. Coca-Cola declined to comment.
Editor's note: This article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.
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