Monster Beverage and Corona brewer in merger talks

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The similarly sized companies have a combined market value of about $90bn

Talks between Monster Beverage, the maker of energy drinks, and Corona brewer Constellation Brands about a combination are progressing, according to people familiar with the matter.

Shares of Monster, which counts Coca-Cola as a major shareholder, had lost about 8% by the end of Monday since Bloomberg News reported in November that it had held discussions with advisers about a potential tie-up with Constellation, whose class A stock is flat during that period. An agreement might take longer to reach or could still fall apart, the people said. The exact structure of the transaction under discussion could not immediately be learnt.While a tie-up with Constellation could open up growth opportunities for Monster, some analysts see limited opportunity for cost savings because they operate in different segments. Any deal would create a unique combination of energy drinks, alcoholic beverages and potentially marijuana.

A possible tie-up “could give the new entity a jump on the growing scramble to serve the surging US market for low-alcohol drinks”, said Bloomberg Intelligence analyst Kenneth Shea. After the Canarchy deal, “we expect the strategic move into the crowded and competitive domestic alcoholic-beverage market as risky, since it will have to boost spending to scale up operations nationally and compete with larger companies with more resources”.

 

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