US: Legal spotlight scares Coca-Cola away from Monster Beverages - analyst

By | 24 September 2012

Monster Beverages has seen its stock price tumble

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%.

Expert analysis

Monster Beverage Corporation - SWOT Analysis

Monster Beverage Corporation - SWOT Analysis company profile is the essential source for top-level company data and information. Monster Beverage Corporation - SWOT Analysis examines the company’s key business structure and operations, history and products, and provides summary analysis of its key revenue lines and strategy.

Sectors: Mergers & acquisitions, Soft drinks

Companies: Coca-Cola Co, Coke

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