Coors/SABMiller to Combine US Operations

The Associated Press
Tuesday, October 9, 2007; 6:26 PM

MILWAUKEE -- The nation's second and third-largest brewers, Miller and Coors, are planning to blend their U.S. operations to help them compete in a struggling U.S. industry and against its leader, Anheuser-Busch.

The deal, announced Tuesday, will place almost 80 percent of the U.S. beer market in the hands of just two companies, the new MillerCoors and Anheuser-Busch, making it a likely target for a tough antitrust review.

Miller Brewing Co., owned by SABMiller PLC, has about 18 percent of the market, as of last year, according to trade publication Beer Marketer's Insights. Molson Coors Brewing Co. has almost 11 percent and Anheuser-Busch Cos. has just under half the market.

The companies said the combination will have to pass an antitrust review by either the Federal Trade Commission or the Department of Justice.

Few analysts expect the government to try to block the deal, however, despite close scrutiny by regulators.

Supermarkets and restaurants _ two large buyers of beer _ will play a large role in the review, said Veronica Kayne, an attorney at Haynes & Boone and former FTC antitrust official.

But the emergence of many smaller brewers has made the industry more competitive than it was a decade ago, said William MacLeod, an attorney at Kelley Drye Collier Shannon and former antitrust official at the Department of Justice. That makes the transaction "much more feasible" now, he said.

Regulators might even see the pairing as helping offset Anheuser-Busch's dominance, Mark Swartzberg, a Stifel Nicolaus analyst wrote in a research note.

Milwaukee-based Miller and Denver-based Molson Coors executives said in a conference call approval could take six months for the joint venture. A final agreement is expected by the end of the year, with the deal closing in mid-2008.

SABMiller, which brews Miller Lite and Miller Genuine Draft, will have a 58 percent economic interest in the venture and Molson Coors, maker of Coors and Coors Light, will own 42 percent. But they will have equal voting interests.

Precise financial terms of the deal were not disclosed.

The move positions the two brewers to better compete against market-leader Anheuser-Busch, brewer of brands like Budweiser, Michelob and Bud Light, executives said.

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