Posted on 07/22/2004 10:09:26 AM PDT by presidio9
Adolph Coors Co. and Canada's Molson Inc. on Thursday agreed to merge in a deal that would create the world's fifth-largest brewer by volume.
The fate of the deal remained unclear, however, due to a last-minute takeover offer for Molson from Ian Molson, a one-time deputy chairman who resigned in June after a falling out with Chairman Eric Molson, his cousin.
Under the Coors-Molson agreement, Molson shareholders would control about 55 percent of the combined company, which would remain largely in the hands of the founding Molson and Coors families.
The deal would solve expansion issues for both companies, which have watched larger rivals such as Anheuser-Busch Cos. Inc. and SABMiller Plc snatch up competitors around the globe over the past few years.
Coors and Molson, Canada's oldest brewer, did not return calls seeking comment on Ian Molson's bid, but the companies said they had agreed not to solicit other offers. They also said they expected their deal to close sometime this fall.
Molson shares rose 70 cents to C$35.60 in early trading on the Toronto Stock Exchange, while Coors shares were down $1.01 to $73.72 on the New York Stock Exchange (news - web sites).
A source close to the situation said Ian Molson sent a letter to a special committee of Molson board members on Wednesday offering to acquire the 218-year-old beermaker for about $4 billion.
The offer did not provide details on financing, the source said.
The Ian Molson deal would be difficult to close since 67 percent of Molson's shareholders would have to sign off on it, and Eric Molson controls 55 percent of the company's stock.
Coors could also make a rival transaction difficult by pulling out of its existing joint venture with Molson, under which the companies sell each other's products in their home countries. The joint venture accounts for about 25 percent of Molson's profits.
Still, some industry bankers said Ian Molson could gain support from enough outside Molson shareholders to prevent the Coors deal from achieving the 67 percent approval threshold.
Also, his cause could be helped by the fact that his deal would offer a sizable premium, as opposed to no premium in the Coors-Molson deal,
Ian Molson could not immediately be reached for comment.
Under the Coors-Molson deal, the shares of both companies would be exchanged for shares in a new, combined company.
The merger, which is expected to produce $175 million in annual savings by 2007, would boost earnings in the first year after closing, the companies said.
Eric Molson would be chairman of the combined company, which would be called Molson Coors Brewing Co. Coors Chief Executive W. Leo Kiely III would be CEO.
Combined, the companies reported $6 billion in sales and volume of 51 million barrels for the 12 months ended March 31.
Wall Street analysts have been skeptical about how a merger would benefit the companies.
"Given that Coors and Molson are already a combined entity since they operate two joint ventures, one in Canada and one in the United States, we question where is the value and/or cost savings/synergies," Smith Barney analyst Bonnie Herzog said in a research note.
Both Coors and Molson are struggling to boost profits.
Coors has seen its lower-calorie products lose market share amid growing competition in recent years.
Montreal-based Molson has been searching for ways to gain a leg up on rival Labatt, owned by Interbrew . Molson bought Brazil's Kaiser brewery in 2002 to expand into South America, but the venture has proven to be a drain on profits.
Molson said on Thursday it earned C$68.3 million for the quarter ended June 30, up from C$54.7 million a year earlier.
Coors on Thursday said second-quarter profit fell 5.6 percent, to $72 million, or $1.90 per share, as the company faced a higher tax rate.
BURP!
The colored water they both make is not beer!!!
In a bid to break into the untapped Muslim market, the new company will be named "Moors".
Nice to have two beers that I don't particularly care for under one corporate umbrella.
Molson in -- Coors out...
HAHAHA!
OMGG LOLOLOL
That is most un PC comment on FR EVER
Don't do that
I almost spit out my coffee
time to tell coors to prepare for a boycott.
Will Molson have the Twins?
I wonder what are the top four producers by volume?
Molson may be from Canada, but the Coors family are huge Bush supporters.
Anheisure Busch
Miller
Labatt
Guinness
Out of all the beer commercials, Coors has the best.
i sure dont want cantadian money fouling our politics.
You get the post of the day award.
You get the post of the day award.
Why, thank you! I'm honored and humbled. :o)
In a bid to break into the untapped Muslim market, the new company will be named "Moors".
Ooooooooo noooooo, I’m sorry… The correct answer was “Moops”.
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