4 Takeaways From Monster Beverage (MNST) Buying CANarchy - BofA Securities

BofA Securities analyst Peter Galbo reiterated a Buy rating and $115.00 price target on Monster Beverage (NASDAQ: MNST) after the company announced that it has entered into a definitive agreement to acquire CANarchy Craft Brewery Collective LLC, a craft beer and hard seltzer company for $330mm in cash. The transaction is expected to close in the first calendar quarter of 2022 and is likely to be financed with cash on hand/short term investments which totaled $2.9bn as of 3Q21.

The analyst stated "we estimated the company’s sales and EBITDA using recent craft brewery transaction statistics including both SweetWater and Dogfish Head. According to its website, CANarchy sold 490k barrels of beer in 2020 and we estimate ~$125mm of sales, which at a 33% EBITDA margin would imply a transaction multiple of ~8x. We view this morning’s announcement as: 1) MNST’s purchase price on both a cash outlay and multiple basis are un-demanding, allowing the company to enter and experiment in a new category. 2) Post the acquisition MNST will still have significant cash on its balance sheet for share re-purchase. 3) At the end of November Bloomberg reported that MNST and STZ were exploring a combination and this morning’s announcement in our view reduces the likelihood of a combination/JV between both companies. Today’s deal provides MNST the opportunity to foray into the beverage alcohol industry without committing a substantial capital investment or relinquishing control of the company. 4) We believe any future “Monster alcoholic beverage” is un-likely to contain caffeine given historical FDA concerns around products containing caffeine and alcohol (i.e. the original Four-Loko of 2010)."

For an analyst ratings summary and ratings history on Monster Beverage click here. For more ratings news on Monster Beverage click here.

Shares of Monster Beverage closed at $94.37 yesterday.

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