The general objective is to acquiring a high growth player in the energy drink segment. Monster offers an opportunity to consolidate the current and failing TCCC energy drinks into a single, more successful, brand. TCCC offers a sophisticated and industry leading cost leadership, access to customers, and distribution channels. An acquisition of Monster would plug the Monster product into the TCCC machine. This could lead to strong synergy through the coupling of the Monster’s rapid growth and TCCC’s efficient distribution and capacity networks. This will also help TCCC diversify its portfolio, since the carbonated beverage market is maturing. For TCCC this is a coupling of diversification and growth opportunity. More specifically, we expect sales of Monster to grow an additional 5% a year for the next five years as a result of TCCC’s distribution network. We expect Monster’s distribution costs to drop by 10%. Also, raw material costs to be reduced by 5% for Monster products or roughly a $35mm cost savings. By combining the two companies we expect to lay-off 700 workers from the sales and marketing staff from Monster and an additional 100 workers from TCCC’s current energy drink staff.
However, there are costs associated with the aforementioned savings. We expect the merger cost, as resulting from integration and due diligence, will likely be $170mm. additionally, we expect to pay $15,000 in severance packages (average annual calculated as 3.5 months pay) for all 800 laid off employees, or roughly $13.5mm.