September 24, 2008 / 4:06 PM / 10 years ago

Hansen shares fall as company silent on Coke pact

BANGALORE, Sept 24 (Reuters) - Shares of Hansen Natural Corp HANS.O fell as much as 17 percent on Wednesday, as investors were most likely disappointed by the energy-drink maker’s silence on a possible distribution deal with Coca-Cola Co (KO.N) at a conference call on Tuesday.

Last week a Stifel Nicolaus analyst had said, citing industry publication Beverage Business Insights, that Monster energy drink maker Hansen was in talks with No.1 soft-drink maker Coca-Cola for a distribution agreement.

Hansen, whose shares have gained about 36 percent over the past one week, was widely expected to comment on the speculation at its mid-quarter conference call on Tuesday, but kept mum.

On Wednesday, three analysts said they believed Hansen and Coca-Cola were holding talks regarding a possible distribution agreement.

A lack of news on the possible alliance is likely to impact Hansen’s shares on Wednesday but “trade sources do indicate that there are ongoing discussions,” J.P. Morgan Securities analyst Dara Mohsenian wrote in a note to clients.

The fact that no share repurchases were mentioned on the call could mean that Hansen is limited from repurchasing shares due to the potential for a stock-moving event, which could be the distribution deal, said the analyst, who has a “neutral” rating on Hansen’s shares.

UBS analyst Kaumil Gajrawala said he believes a deal is likely, based on discussions with industry contacts. He considers any weakness in the company’s shares as a buying opportunity.

Gajrawala has a “buy” rating and a price target of $37 on the stock.

Stifel’s Mark Astrachan said, “We believe a deal with Coke would be especially significant to Hansen should it include Europe, a scenario we consider likely given that Hansen enjoys solid U.S. distribution and it is unlikely to disrupt existing agreements without a strong incentive to do so.”

“We think any formal relationship is likely to be an alliance rather than an outright purchase of Hansen. We would, however, expect any deal to help position Coke for an eventual purchase of the company,” Astrachan, who has a “buy” rating and a price target of $34 on Hansen shares, said.

Hansen and its main rival in the energy drinks market, privately held Austrian company Red Bull, together account for nearly two-thirds of the volume in the overall energy-drink market, according to Astrachan.

Shares of California-based Hansen fell to a low of $26.21, before paring some losses, and were down $1.89 at $29.61 in midday trade on Nasdaq. (Additional reporting by Vikram Subhedar; Editing by Pratish Narayanan)

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