Monster Beverage launches $3 billion stock buyback

MW Monster Beverage launches $3 billion stock buyback

By Steve Gelsi

Beverage company's chief executive may sell up to about $33 million of stock to provide 'flexibility'

Monster Beverage Corp. said Wednesday it's moving ahead with a maximum $3 billion modified "Dutch auction" tender offer that the company's CEO said is part of a potential succession plan for next year.

Monster Beverage's stock $(MNST)$ rose 1.8% to $55.66 in premarket trades after it said it would purchase shares of its common stock for cash at a price range of $53 to $60 for a maximum aggregate purchase price of up to $3 billion starting on Wednesday.

The company is funding the purchase with $2 billion of cash on hand, $750 million from a new term loan and $250 million in borrowings under a new revolving credit facility.

Monster Beverage unveiled plans for the transaction on May 2.

Chief Executive Cyril Sacks told analysts at the time that the company had already done a Dutch auction in 2016, so another similar transaction would fit the company's plans to allow shareholders - including himself - to cash in their stock.

Sachs said his participation in the offer of up to 610,000 shares "may provide me some flexibility to consider my potential options" which in turn will help the company's succession planning.

Based on the $54.67 a share losing price of Monster's stock on Tuesday, Sachs's 610,000 shares would be worth about $33 million.

Sachs said he is considering whether to reduce his day-to-day responsibilities in 2025, when Hilton Schlosberg would transition to chief executive from co-chief executive. Schlosberg also plans to sell 610,000 shares.

Sachs plans to remain chairman.

"Given the recent softness in the market, we believe that it is an opportunistic time to execute an at-scale transaction of this nature," Sachs said. "This structure gives the company the opportunity to repurchase a greater number of shares and do so more quickly."

Prior to Wednesday's moves, Monster's stock was down 5.1% in 2024, while the S&P 500 has risen by 8.8%.

-Steve Gelsi

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May 08, 2024 09:33 ET (13:33 GMT)

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