Brewers Adolph Coors Co. and Canada-based Molson Inc. yesterday announced plans to merge, a move that would make the new brewing company the world's fifth-largest.
The merged brewer, to be named Molson Coors Brewing Co. and have headquarters in Denver and Montreal, would have annual revenue of $6 billion and is expected to generate $175 million in savings, half of which the companies said would be realized within the first 18 months.
The combined company would offer brands including Coors Light, Coors Original, Zima XXX, Molson Ultra and Molson Dry.
Under the agreement, Molson shareholders would control 55 percent of the company to Coors shareholders' 45 percent.
Coors is the third-largest brewer in the United States and has 11 percent of market share. As owner of the British brand Carling, it is the second-largest brewer in Britain. Molson is Canada's leading brewer with 43 percent market share.
Molson spokeswoman Sylvia Morin said the merger, which still must be voted on by shareholders and approved by regulators, is expected to be completed in the fall. But former Molson board member R. Ian Molson may attempt to stop it. Molson plans to offer up to $4 billion for the company to block the deal, according to a report yesterday in the Wall Street Journal. Molson could not be reached for comment.
Molson withdrew from the board in June after a dispute with his cousin, board Chairman Eric H. Molson, about the direction of the company -- one of the most recent actions in a long and bitter dispute between the two men.
But Morin said that Ian Molson probably cannot keep the transaction from going through and that any bid he entered would be rejected.
"It will not change things. This is an agreement that the controlling shareholder has agreed to with Coors," Morin said. That would be Eric Molson, who indirectly controls 55 percent of the company. "We have to get shareholder approval, but the independent committee of shareholders has reviewed the offer from Coors and has already made a decision."
Jeffrey G. Kanter, an analyst with Prudential Equity Group LLC, wrote Wednesday that the merger seems to be a "marriage of convenience designed to prevent a takeover of either company and keep the families in control, which we don't think sounds too shareholder friendly."
Kanter speculated that the deal was a precursor to a larger one with the Mexican brewer Fomento Economico Mexicano SA, whose brands include Tecate, Sol, Dos Equis and Carta Blanca. Such a merger would create an "Americas powerhouse," he said.
Morin said she had no knowledge of any overtures involving the Mexican brewing company but noted that Molson and Coors hope the deal will make the new brewing company a "player in the consolidating market."
On Wednesday, prior to the merger announcement, Coors stock closed at $74.73. The stock fell yesterday $2.33, to $72.40. Molson, which closed at 34.70 Canadian dollars (about $27 U.S.) on Wednesday, climbed one Canadian dollar yesterday on the Toronto stock exchange.
W. Leo Kiely III, chief executive of Coors, said the merger would give the company the "market and financial strength necessary to compete in the increasingly challenging market."
Eric Molson would serve as board chairman for the new company, and Kiely would serve as chief executive.
Molson bought Brazil's number-two brewer, Cervejarias Kaiser SA, for $765 million in 2002, but the acquisition was disappointing.
Under the proposed plan, each Molson Class B share will be exchanged for a 0.126 voting share and 0.234 nonvoting share of Molson Coors. Each Molson Class A share will be exchanged for a 0.36 nonvoting share in the new entity. Coors shareholders will receive a share in Molson Coors for each share they own.