According to the Wall Street Journal Coca-Cola Co. (KO) is evaluating an $11 billion plus acquisition of Monster Beverage Corp. (MNST). At over 30 times earnings I think this acquisition is not a good idea of Coca Cola. While I’m sure Coke could increase Monster’s sales through improved distribution, this is too large of an acquisition on a company that is facing increased competition, and which I would argue lacks the brand value to warrant such a price. I think as an investor if Coca Cola were to invest $11 billion into their own energy brands, it is very likely that the result would be something greater than what Monster offers. I’d be really curious to hear what Coca Cola’s largest investor Warren Buffett thinks of this deal, but I would doubt that he is really excited about it at this price.
INVESTING IN THE FINANCIAL MARKETS INVOLVES RISKS. OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS.