Energy drink drama: Constellation and Monster talk merger with Coca-Cola and Anheuser-Busch lurking
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Monster Beverage (NASDAQ:MNST) opens with a gain of 3.15% after media reports indicate that M&A discussions with Constellation Brands (STZ
-1.1%) are progressing. Analysts have posted early reactions to the report.
Stifel said it thinks a merger-of-equals would result in Constellation Brands (NYSE:STZ) acquiring Monster Beverage (MNST) and paying a premium to do so, although it is unclear if it is the right move.
"We think Constellation acquiring Monster has limited synergy potential, and could potentially be disruptive to Monsterâs business. Conversely, we continue to view an acquisition of Monster by The Coca-Cola Company as making the most sense given meaningful cost and sales synergies."
The firm does think deal rumors are likely to place a floor under MNST shares ahead of the earnings report on February 24.
In its breakdown, RBC Capital Markets stated that it saw a potential MNST acquisition of STZ as plausible given MNST's net cash position and potential EPS accretion, although it noted the tenure and age of MNST's C- suite as a potential dragging point for a deal.
Meanwhile, Evercore ISI said a potential Monster-Constellation tie-up could range from a full merger of equals or perhaps just a distribution agreement or joint venture arrangement. The firm also wondered if Coca-Cola (KO
+1.3%), which owns about 20% of MNSTâs stock, could get involved or potentially Anheuser-Busch InBev (BUD
+1.2%). It was also pointed out that STZ made an approach to Brown-Forman in 2017 with nothing materializing. Potential cost synergies for a STZ-MNST combination include the purchase of aluminum cans and media spending. Standing in the way of a deal seeing the finish line is Coca-Cola's (NYSE:KO) large presence on the Monster board and Constellation Brands (STZ) commitment to return $5B in cash to shareholders.
Compare valuation, growth and performance metrics on Monster, Constellations Brands, Coca-Cola and Anheuser-Busch InBev.