Credit Suisse IBD- Team Mavericks

8/17/2019 Credit Suisse IBD- Team Mavericks

1/11

! Competitive Landscape

• Overview of Competitors

• Positioning & Trends

! Monster Beverage Corporation – Overview

•

Strategy & Performance• Recent Acquisitions & Integration

! National Beverage Corporation – Overview

• Company Summary

• Business Model Overview

!

Strategic Recommendation

• Synergies

! Valuation Summary

! Appendix

Mavericks

Team Mavericks Jake Goldberg

Mark Jiang

Kamal Tamboli

Executive Summary


2/11

Competitive Landscape

Company Characteristics

Positioning Trends

!

• Privately held company (based in Austria)

• 2nd Highest market share based on volume (30% market share)

• Global marketing & advertising: events, team ownerships, record labels, etc.

• 3rd Highest Market share based on volume (19% market share)

• Distributed by Pepsi Co.

• Produced by Coca-Cola, trademark licensed by Holley Performance

• Sales behind Rockstar, Red Bull, and Monster

• Initially distributed under Mountain Dew, manufactured by Pepsi Co.

• 4th in U.S. Retail Sales

•

Second largest energy drink company in the

world with strong growth prospects- net sales

increased by 14.2% in the most recent quarter•

Rapidly growing presence in over 70

countries- 5%+ market share growth inCanada and Mexico last year

•

Robust cash balance and cash flow from

operations ($420mm balance and $110mCFO as of June 2012)

Increasing commodity prices

Increased safety concerns

Product expansion

• Competitors looking to offsetincreased prices with higher volumes

and/or potential synergies

• Share price fell due to uncertaintyregarding litigation and regulation

• Strategic dispersion into new categoriesincluding energy shots, rehab drinks,

and zero-calorie options.

Mavericks


3/11

Monster – Situational Overview

Monster’s Strategy Performance

Recent International

Distribution Agreements

2012 Quarterly Financial Performance

#

0%

10%

20%

30%

40%

2008 2009 2010 2011 TTM

YoY Revenue Growth

Expand product line with zero-calorieand rehab drinks.

Rehab and Absolute Zero helpedMonster outperform category by

660bps in January 2012.

Bought back $500m of common stockin order to boost shareholder’s value.

Stock price saw temporary gain, buthas continued to decrease over past 6

months.

Outsources manufacturing/packaging,buys ingredients from 3rd party

suppliers, delivers to 3rd party bottlers.

Industry leading gross margins

since 2004.

1. Schweppes Australia Pty

Q2 2009

• Exclusive distributionthroughout Australia

of certain Monsterenergy beverages.

2. Asahi Soft Drinks Co.

Q3 2011

• Exclusive distribution

throughout Japan of

certain Monster

energy beverages

3. Lotte Chilsung Beverage Co.

Q3 2011

• Exclusive distribution

throughout South

Korea of certain

Monster beverages.

Maveri

cks


4/11

Business Model

Overview of National Beverage Corporation

$

• Based out of Ft. Lauderdale, FL

• Market Cap of $660mm

• Ticker: NASDAW: FIZZ

• Manufacturing, marketing and sale of a diverseportfolio of flavored beverage products.

•

Targets regional niche markets throughspecialized marketing, custom flavor variety, and

value pricing.• Eg. Introduced a new line of flavors with

its Shasta soft drink that specifically

appealed to Hispanics in Georgia state

Strengths Weaknesses• Broad product portfolio

encompassing non-alcoholic

beverages product line

• Overdependence on the USmarket for revenue generation

• Industry leading Return on Equity(49%)

• Lack of economies of scale

• Strong brand recognition andmarket presence in the southern U.S.

region

• Poorly received energy drinkproduct called “Rip It”

Opportunities Threats

•

Untapped potential ininternational expansion

•

Planned regulation bysome states to levy

soda tax

• Growing energy drinksmarket in the U.S.

• Intense competition

• Increase presence in thenorthern U.S. region

• Rising labor wages inthe US

Mavericks

Top Institutional investorsShares

(mm)

%

Ownership Value (mm)

IBS Partners, Ltd. 33.300 71.93% 492.87

Kayne Anderson RudnickInvestment Mgt, LLC

2.030 4.38% 30.78

Dimensional Fund Advisors, LP 1.050 2.28% 15.75

Caporella 0.942 2.04% 13.95


5/11

Recommended Price Per Share: $19

%

Mavericks

All Values: FIZZ price per shareCurrent Price as of 11/8/12 - $14.69


6/11

Strategic Recommendation:

Acquire National Beverage Corp.

Transaction Overview

Before Acquisition After Acquisition

Synergies

&

Mavericks

Cost Synergies

" Headcount Reduction

• Combined administrative employeesand sales teams will be cut (SG&A)

" Revenues Synergies

• Cross Selling Monster and National

Beverage Company products

"

Employ diversified products to improvemarket reach and mitigate dependency on

Monster’s Energy Drink product line

" Synergies improve growth prospects anddecrease costs

"

Expand market share in the southern U.S.region through NBC’s distributor and retail

relationships

"

Long-term potential to leverage Monster’s

international distribution and marketingchannels

"

Monster currently generates 90% of itsprofits from its energy drink product

line

" The energy drink industry is affectedby increasing competition andregulatory scrutiny

" Dependent on third-parties to produce

and distribute Monster products

"

Relatively weak distribution and market

share in the southern U.S. region

" Suggested Price: $19/share (30% premium to

current share price), $884mm Valuation

" 40% Cash, 60% Debt

" Accretion/Dilution Analysis:

" Year 1: 5.1% Accretion

" Year 2: 10.2% Accretion


7/11

A1. Discounted Cash Flow Analysis

A2. Selected Peer Analysis

A3. Precedent Transactions

A4. Accretion/Dilution Analysis

Appendix

'

Mavericks


8/11

Discounted Cash Flow Analysis DCF Model Assumptions

Source: SEC Filings, Bloomberg Appendix A1

Mavericks


9/11

National Beverage Corporation

Selected Peer Analysis

Appendix A2

Mavericks


10/11

Source: Thompson One Banker

Precedent Transactions

Appendix A3

Mavericks


11/11

Accretion/Dilution Analysis

Appendix A4

Mavericks

Documents

Credit Suisse IBD- Team Mavericks