The Coca-Cola Company (NYSE:KO) should buy the whole of Monster Beverage Corp (NASDAQ:MNST), John Faucher, senior consumer staples analyst at JPMorgan, said in a discussion on CNBC.
The comment which was made in a segment of CNBC’s “Squawk Box” comes after it has been reported that The Coca-Cola Company (NYSE:KO) has bought a substantial 16.7% stake in Monster Beverage Corp (NASDAQ:MNST). The deal is valued at $2.15 billion.
Faucher wonders why The Coca-Cola Company (NYSE:KO) does not just buy Monster Beverage Corp (NASDAQ:MNST). The analyst said that he thinks this is the right move for the stagnating giant. He said that the carbonated softdrinks industry has been sluggish for the past several years and will continue to be sluggish as people are concerned about obesity, artificial sweeteners and the like.
The JPMorgan analyst also thinks that The Coca-Cola Company (NYSE:KO) acquiring this substantial stake in Monster Beverage Corp (NASDAQ:MNST) is not risky. In fact, he is asking why the beverage giant has not just bought the whole company.
“[…] I would question whether Coke should be going all the way in this. Why are you buying a 17% stake when you could buy the whole company? Because Coke has a growth problem like most consumer companies do. If you buy it, you integrate it into your operations, you get the benefit on the revenue line, the operating profit line and the earnings line. It will be modestly accretive, but it is not the jolt to the financials which is what Coke really needs right now,” he explained.
According to Faucher, he has an ‘Overweight’ rating on Monster Beverage Corp (NASDAQ:MNST) and a ‘Neutral’ rating on The Coca-Cola Company (NYSE:KO), but he thinks the latter should be buying the energy drinks-maker. Furthermore, Faucher said that he thinks Vitamin Water has kept The Coca-Cola Company from making a big acquisition because it was such a big buyout, but the deal has given the company a lot of lessons which they can now apply to Monster Beverage Corp if ever they buy the energy drinks company.
Faucher went on to say that what Monster Beverage Corp (NASDAQ:MNST) has been very successful in communicating with their customers. If The Coca-Cola Company (NYSE:KO) does buy the firm, the analyst said that it should keep the Monster Beverages Corp separate and let them continue how they relate to their customer base. Moreover, to change his rating on The Coca-Cola Company, he said the company needs to improve their European business and to buy whole companies to get growth going again.
This very same thought was expressed by CNBC’s Jim Cramer last month when he said Monster Beverages Corp is an attractive takeover target for companies like The Coca-Cola Company.