Monster Beverage Corp (NASDAQ:MNST) could be the next beverage company that will be a target for a takeover, Jim Cramer said in a discussion on CNBC.
The thought was prompted, Cramer said, because of Hormel Foods Corp’s (NYSE:HRL) $450 million acquisition of CytoSport Holdings, the makers of the Muscle Milk drink. According to Cramer, this deal helps boost growth rate at the Spam-maker by expanding to a niche beverage market.
Cramer then went on to venture that if a company like Hormel is willing to spend this much on a company that makes a product that is not that much related to their own products, other companies may be willing to do the same. Here is where Monster Beverage Corp (NASDAQ:MNST) comes in which Cramer said is a possible takeover candidate.
According to Cramer, Monster Beverage Corp (NASDAQ:MNST) has strong fundamentals which makes it attractive. It’s the number one energy drink in the U.S. by volume, he said, and is number two by value behind Red Bull which is made by private firm Red Bull GmbH. In terms of the whole world, the company is the world’s second largest energy drink manufacturer with 15% of the global market, Cramer added.
Nonetheless, Cramer did discuss that the stock has had its share of troubles. Furthermore, when studies detailing negative effects of drinking caffeinated energy drinks were released, the company experienced a decline in sales, Cramer pointed out. However, the Mad Money host said that Monster Beverage Corp (NASDAQ:MNST) appears has these troubles in the rearview mirror. Furthermore, he said that this company can really be acquired by someone like The Coca-Cola Company (NYSE:KO). However, it’s not only the Coke-maker which can be interested in the energy drink-maker, Cramer added.
Cramer then said that even though Monster can soar when a takeover bid gets the ball rolling, it looks like the stock will continue to climb even without a takeover bid. Ending, the CNBC host said:
“When Muscle Milk gets acquired by Hormel, of all companies, you have to start looking for more niche beverage plays with strong fundamentals that could make attractive takeover targets. With all the consolidation in the food and beverage space, I think it’s worth speculating on a monster stock, the stock of Monster Beverage.”
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Monster Beverage Corp (NASDAQ:MNST) shareholders includes Donald Chiboucis’ Columbus Circle Investors and Neal C. Bradsher’s Broadwood Capital which reported, by the end of March, 1,963,535 and 1,599,136 shares in the company respectively.