Coors/SABMiller to Combine US Operations

Twelve packs and 18 packs of Coors Light and Coors beer share space in a cooler in a liquor store in southeast Denver in this May 7, 2007 file photo. The makers of Coors and Miller plan to combine their U.S. brewing operations in an effort to compete better against industry-leader Anheuser-Busch. The joint venture announced Tuesday, Oct. 9, 2007 will be known as MillerCoors and will have responsibility for selling brands like Miller Lite and Coors Light in the U.S. (AP Photo/David Zalubowski, file) (David Zalubowski - AP)

"It is clear Miller and Coors will be a stronger, more competitive U.S brewer than either company can be on its own," said Molson Coors Chief Executive Leo Kiely, who will be the new CEO of MillerCoors.

Anheuser-Busch declined to comment publicly about the deal.

Shares of Molson Coors Brewing Co. hit a 52-week high of $57.68 on the news Tuesday. The stock rose $5.32, or 10.5 percent, to $56.15. SABMiller shares rose 1.43 percent to close at 1,487 pence ($30.33) in London. Anheuser-Busch shares fell 46 cents to $51.57.

The move could prompt a long-rumored deal between Anheuser-Busch and InBev NV S.A., the world's largest brewer by volume, said Juli Niemann, an analyst with Smith Moore & Co. in St. Louis.

"They're going in the inevitable direction, and I think that's the InBev direction," she said.

Such pairings deliver huge cost savings, she said, and a deal with InBev, known for beers like Stella Artois, would certainly help Anheuser-Busch.

SABMiller and Molson Coors said the joint venture will result in cost savings of $500 million over three years, mainly from reducing shipping distances, optimizing production and eliminating overlapping corporate and marketing services. But the companies will have to make a one-time cash outlay of $450 million to achieve those savings.

London-based SABMiller, which also brews European beers such as Peroni, and Denver-based Molson Coors, also known for craft beer Blue Moon, will each have five members on the new company's board of directors.

Pete Coors, vice chairman of Molson Coors, will serve as chairman of the new company with Kiely as CEO. Tom Long, CEO of Miller, will be president and chief commercial officer.

Under the agreement, the companies said they will conduct all of their U.S. business exclusively through the venture. They project MillerCoors will sell 69 million barrels in the U.S. and reach revenue of about $6.6 billion.

Anheuser-Busch sold 102.3 million barrels in the U.S. last year and had net revenue of $15.7 billion.

Kiely said beer sales and profits industrywide are dwindling due to rising sales of wine, spirits and craft beers.