Molson Coors and SABMiller merge U.S. operations
Grant Surridge, Financial Post
Published: Tuesday, October 09, 2007
Shares in Molson Coors Brewing Co. rose up to 13% in Tuesday morning trading after the brewer said it will merge its U.S. operations with those of SABMiller PLC in a joint venture "to create a stronger, brand-led U.S. brewer."
The tie-up affects each company's U.S. businesses only. Their international operations, including those in Canada, will continue to be run separately by the two brewers.
In a statement, vice-chairman of Coors, Pete Coors, said that "profound changes in the U.S. alcohol beverage industry" powered the transaction because of the challenges they present each company.
Consumers are broadening their tastes and are increasingly looking for greater choice and differentiation; wine and spirits companies are encroaching on traditional beer occasions, and global beer importers and craft brewers are both taking a larger share of volume and profit growth," he said.
The new company, called MillerCoors, will have annual combined beer sales of 81 million hectolitres and revenue of about US$6.6-billion.
Each company will have a 50% voting interest in the venture, with five directors each on its board. Based on the value of the contributed assets, SABMiller will have a 58% interest and Molson Coors 42%.
Anheuser-Busch Inc. controls about 50% of the U.S. beer market, while Miller has about 19% and Coors 11%, according to data from Beverage Marketing Corp.
The two brewers said they expect the deal to translate into US$500-million in annual cost synergies by the third year of combined operations.
Pete Coors will serve as chairman of the joint venture. Leo Kiely, the current chief executive of Molson Coors, will be the new chief executive, and Miller's current chief executive Tom Long will serve as president and chief commercial officer.
SABMiller and Molson Coors will also enter into a mutual standstill agreement which will prevent either company from making an unsolicited offer for the shares of the other party for 10 years following completion of the transaction.
Shares in Molson Coors Brewing hit a 52-week high of $57.53 in Tuesday morning trading in New York.
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