Monster Beverage Corp. is closing in on a $362 million deal to acquire rival drink maker Bang Energy out of bankruptcy, but a regulatory review has put the tie-up in jeopardy, according to court papers.
Bang Energy maker Vital Pharmaceuticals Inc. said in a Wednesday court filing that the proposed sale to Monster is supported by its lenders and represents “the only viable path” to repaying its creditors in Chapter 11. The deal also includes a related settlement of litigation between the two companies.
Bang’s parent company said the transaction is being held up by a US Federal Trade Commission review. The FTC has indicated it will require more information on the sale as part of a review process.
But if impediments to the deal don’t “fall away” by the end of the week, the company could be forced to liquidate, according to Bang. The companies are urging the FTC to grant early termination of the review.
Bang lawyer Andrew Sorkin said during a Thursday court hearing that the company will cease operations if it’s unable to move forward with the Monster transaction, an outcome that would cost roughly 700 jobs. The FTC needs to make a determination within 24 hours because Monster’s asset purchase agreement terminates if the deal doesn’t clear the agency’s review process by tomorrow night, he said.
“Either there’s a sale to Monster or there will be an immediate liquidation,” Sorkin said.
The FTC review puts the company “in a challenging and uncertain position” because Monster requires the deal close by August 3 and financing for its Chapter 11 case matures on June 30, Bang said in court papers. Bloomberg has reported the FTC and Justice Department are requiring firms turn over more information about their transactions to crackdown on illegal mergers, a change that could add two to three months to deal timelines.
The FTC is evaluating whether the so-called failing firm defense applies to the transaction, which would provide a justification for ending its review early, because Bang would be forced to liquidate if the Monster deal falls through, Sorkin said.
An FTC spokesman said the agency doesn’t comment on merger investigations.
The transaction is also contingent upon the companies getting court approval of a related settlement of Monster’s false advertising suit against Bang over “super creatine” branding on some Bang products and related litigation.
Bang’s parent company filed bankruptcy last October, months after a California jury awarded Monster $293 million against Bang and its founder and former Chief Executive Officer Jack Owoc. Earlier this year, the energy drink maker fired Owoc, who has publicly criticized how advisers are handling the Chapter 11 case and has fought the company over use of his social media accounts.
Owoc and lawyers for Bang Energy and Monster didn’t respond to messages Thursday seeking comment.
(Updates headline and includes details on FTC antitrust exception.)