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Monster and Constellation merger talks continue

15 February 2022 By Jessica Mason

Merger talks between Monster Beverage Corp. and Constellation Brands Inc. are progressing, according to sources.

A deal that would see the energy drinks maker and Corona brewer effectively combine could be agreed in the next few weeks if discussions continue at this pace, according to Bloomberg.

The companies, which are similarly-sized, would reportedly have a combined market value of around US$90 billion.

Shares of Monster, which counts Coca-Cola Co. as a major shareholder, fell 8% following rumours back in November that it had been in talks about a possible merger with Constellation, whose Class A stock was allegedly flat during the same period. After the close of regular trading on Monday, Constellation fell 2.2% while Monster’s shares, after a brief spike, were up approximately 3.5%.

Sources hinted that a merger decision could still potentially take a while to be reached or could still fall apart nearing the final hurdles however, the exact structure of the transaction under discussion remained unconfirmed and representatives for each of the companies have declined to comment further.

Analysts have stated that, while a merger with Constellation could open up growth opportunities for Monster, there were limited opportunities for cost savings since the companies operate in different categories of the drinks industry. That said, any merger could, hypothetically become the beginnings of a larger business spanning a combination of sectors including energy drinks, alcoholic beverages and, potentially, marijuana

In January, Monster bought Canarchy Craft Brewery LLC for a reported US$330million, adding a further six brands including Squatters, which makes Juicy IPA, to its line up. However, a deal with Constellation would broaden its alcoholic drinks remit considerably since Constellation also has a stake of almost 40% in Canadian cannabis company Canopy Growth Corp, that sells THC-infused drinks.

Any deal including THC-infused drinks, could have implications for Coca-Cola’s almost 20% stake in Monster and affect its distribution pact, so there is a lot that could unravel if the talks result in an agreement.

There is also concern that producing THC-infused drinks could potentially damage the image of the Monster and Coca-Cola brands. However, there is also the opposing view that it could present an opportunity for Coca-Cola to add indirect exposure to the growing market for cannabis products as a testbed for future expansion.

Any merger deal involving Constellation would likely require the support of the Sands family who are major shareholders and also hold top board position within the firm.

Constellation, which is based in Victor, New York, began as a wine producer in 1945, however it now sells the beers Corona Extra and Model Especial in the US as well as Casa Noble Tequila, Svedka Vodka and High West Whiskey illustrating it is unafraid to offer up a diverse drinks portfolio.

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