US: Legal spotlight scares Coca-Cola away from Monster Beverages - analyst
Monster Beverages has seen its stock price tumble
Regulatory pressure on the energy drinks market in the US may have served to scare The Coca-Cola Co off a move for Monster Beverage, an analyst has said.
Rumours that Coca-Cola was interested in buying Monster heated up in July after the latter's share price nose-dived. However, CLSA has said that any attraction has been cooled by recent legal moves from a US attorney general and letters from US senator Dick Durbin seeking stricter oversight on energy drinks by the Federal Drug Administration.
“We believe recent regulatory scrutiny of energy drinks removes Coke as a potential suitor for Monster” CLSA said in a note released earlier today (24 September). “A possible Coca-Cola deal had supported the shares in the past two to three years but, with a recent attorney general inquiry followed by a Durbin letter probing the category, we do not consider a deal likely.”
Monster's shares dropped by a quarter to US$50.78 between 8 August and 12 September. They rebounded slightly last week and in early trading today stood at $54.15.
CLSA said an accretive deal could still take place, but not unless regulatory concerns are cleared.
The analyst heaped further pressure on Monster's shareholders by dropping its H2 sales growth prediction from 23% to 20%. Sales growth in the first-half of the year was 28%.
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