Following news that Monster has been the S&P’s top company of the last 20 years, it’s now looking to expand further through a novel merger
Nov. 23, 2021
Reports have emerged that Monster Beverage Corporation (NASDAQ: MNST) is looking to explore the possibility of a tie-up with Constellation Brands Inc. (NYSE: STZ). Constellation, the manufacturers of popular beers Corona and Modelo, is currently valued at roughly $44 billion, just shy of the $47 billion Monster is valued at.
Monster, fresh off being named the most successful stock of the last two decades on the S&P 500 (NYSEARCA: VOO), has reportedly discussed the deal with its advisors. Let’s take a close look at what that could look like.
What details do we know so far?
So far there has been no indication as to whether the deal would incorporate a full merger or a potential asset agreement. Representatives from both companies either declined to comment or couldn’t be reached.
Analysts have been quick to point out that the two companies don’t seem to fit extremely well together. Monster has performed remarkable work in securing itself as a top brand within the energy drinks space. A move into alcoholic beverages, particularly if combining alcohol with caffeine, could lead to both brand and regulatory issues that the company would rather avoid.
Monster could be looking to move into the cannabis-infused beverage space through this merger, with Constellation already owning a close to 40% stake in Canadian marijuana company Canopy Growth. However, this could also lead to irreparable damage to Monster’s already established brand.
So, should I invest in Monster?
Monster has already proven its merit through its continued success over the past 20 years. Rising 107,060% in that time is no easy feat, and the company has become one of the most recognizable names in the beverage industry as a result. It would certainly form part of a strong core in any long-term investment portfolio.
The issue comes when we look at room for potential growth. Most of Monster’s gains over the last 20 years came in the first decade of that period. The company is certainly still growing, with the share price almost doubling in the past five years, but growth is becoming increasingly hard to come by.
A merger such as this could be exactly what’s needed to jump-start growth again and launch Monster into new markets where its considerable marketing spend can pay dividends. As talks continue to develop, we’ll be watching for news of any potential deals very closely, as it could signify a fantastic opportunity to invest.
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