Coors, Molson Confirm Merger Talks

Coors, Molson Confirm Merger Talks Mon Jul 19, 2004 05:32 PM ET

By Tom Johnson and Rachelle Younglai NEW YORK/TORONTO (Reuters) - Adolph Coors Co. (RKY.N: Quote, Profile, Research) , the No. 3 U.S. brewer, is engaged in talks to merge with Canadian brewing company Molson Inc. (MOLa.TO: Quote, Profile, Research) and create a more powerful rival to market leaders SABMiller (SAB.L: Quote, Profile, Research) and Anheuser-Busch (BUD.N: Quote, Profile, Research) , the companies said on Monday.

The negotiations involve structuring the transaction in a way that would offer little or no premium to shareholders of either company. The terms being discussed would include naming Molson Chairman Eric Molson the combined company's chairman, while Coors Chief Executive Officer Leo Kiely would be CEO, the companies said in a joint statement.

An announcement "could be made in the near future," they said, but they also warned the talks could break down at any time. Combined, the two companies would boast a market capitalization of more than $6 billion.

The deal would solve expansion issues for both companies, which have watched larger rivals snatch up competitors around the globe over the past few years.

"Global beer is consolidating at a fairly healthy clip," said Raymond Lai, analyst with Raymond James Ltd. "And certainly from a purchasing power point of view, a bigger beer company would benefit from purchasing advantage as they do much more global sourcing of their raw materials, which is a large component of cost structuring."

Denver-based Coors has struggled of late to overcome a health-conscious shift away from beer to wine and distilled spirits. Unlike other brands, Coors has yet to introduce a successful low-carbohydrate beer, and the company's Coors Light brand is losing share to SABMiller's Miller Lite and Anheuser-Busch's Bud Light.

Montreal-based Molson, Canada's oldest brewer, has been searching for ways to gain a leg up on rival Labatt, owned by Interbrew (INTB.BR: Quote, Profile, Research) . The company bought Brazil's Kaiser brewery in 2002 to expand its reach into South America, but the venture has proved to be a drain on its profits.

Coors and Molson already have joint ventures to distribute each other's products in the United States and Canada so it is hard to see how a combination would benefit them, said Benj Steinman, editor of industry trade newsletter Beer Marketer's Insights.

"It makes them bigger on the global scene," Steinman said. "But no major synergies are immediately apparent."

Others agreed that while the combination would provide expanded market presence , the deal seemed to provide little growth momentum.

"There would be some short-term cost synergies but long term strategic benefit I don't see a lot of change from the status quo," said Michael Van Aelst, analyst with CIBC World Markets. "They both already have significant relationships with each other in North America. I don't see strategic benefit to this type of a merger."

Sources close to the talks said the issue of who would run the combined company had been a significant snag in negotiations thus far.

Coors' founding family controls about one-third of the company's voting stock. But after four generations of being family run, the chain was disrupted recently by Chairman Peter Coors' declaration that he would take an unpaid leave of absence to run for a U.S. Senate seat.

Molson's leadership status is equally in flux. The 218-year old company saw deputy chairman Ian Molson quit in June after a dispute with the company's chairman and his cousin, Eric Molson, splitting the Molson family in two.

Coors shares climbed as much as 9 percent on Monday before closing up $2.54, or 3.5 percent, at $75.56 on the New York Stock Exchange on word of the talks. Molson shares climbed 85 cents to close at C$33.45 on the Toronto Stock Exchange. (Additional reporting by Mark Weinraub)

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Reply to
Garrison L. Hilliard
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Then what the crap is that Aspen Edge stuff I see everywhere? Now it takes TWO journalists to get their facts wrong.

--NPD

Reply to
Nick Dempsey

Then what the crap is that Aspen Edge stuff I see everywhere? Now it takes TWO journalists to get their facts wrong.

--NPD

Reply to
Nick Dempsey

Then what the crap is that Aspen Edge stuff I see everywhere? Now it takes TWO journalists to get their facts wrong.

--NPD

Reply to
Nick Dempsey

Note the quote said *successful* low-carb beer. I suspect it's not selling terribly well.

Speaking of low-carb beers, I've noticed in the past few weeks that there's a lot of low-carb beer in stores here in southern California now from Dortmunder Aktien Brauerei. Haven't bothered to try. Can't say I'm in a big hurry to do so.

-Steve

Reply to
Steve Jackson

Notice he said *successful* low-carb beer. Aspen really sucks and is over priced. It's a flop IMO.

Hope this helps!

Reply to
piddie

LCBO is govt'. Beer store is private. I don't care either Frank. I only drink REAL beer.

Ramboyd

===== "My Ottawa Includes Corruption"

Reply to
Ramboyd

It all goes back to the early 1930s when Ontario decided to get out of the Canada Temperance Act and had to make a decision on how beer should be distributed.

While it was one thing for folks to go to a liquor store and pick up a

26-er of booze, beer presented the problem of heavy cases and kegs and the need for them to be delivered to homes and hotel taverns. (There were no bars then ... and few people drove cars.) The government did not want to get into that business and the trucks involved -- just control it. Breweries were allowed to sell their own product at the brewery. There were few of those in Toronto and none at all in some cities. So the breweries came up with the Brewers Retail and the government bought it.

Breweries in places such as Kitchener, Windsor and Sudbury sold from their brewery store, which was not a problem to drinkers 'cause people back then only bought their hometown brew.

Sleeman's, being a relatively new operation, likely bought a stake in the Brewers Retail in quite recent years to guarantee its product being marketed in the Beer Store, rather than being restricted to its brewery and the LCBO stores.

Ontario wineries got the same deal and there were wine stores all over Ontario and they were restricted to selling only their own product -- such as Bright's, Chateau Gai and London Winery -- all still operating today but with fancier names. Their products were also available at LCBO stores.

Reply to
Hownow

The Beer Store people will just do what they have always done. Give kickbacks to influential people in the form of "political donations" (see Elections Ontario site) and they will get to keep the Patronage Monopoly.

Come on folks. Do you really think that this monopoly is on the up and up? Its a private monopoly so it most likely violates NAFTA let alone WTO treaties. The only reason Labatt partners with Budweiser is so that Budweiser wouldn't sue to break up the monopoly.

But will the Beer Store ever be broken? I seriously doubt it. This is Ontario after all. Land of the timid, home to people who fear risk. Too many people making mint of $35 a case for beer. Fuck the consumer.

Reply to
Joe Bidwell

  1. Same as it was yesterday.
  2. It works.

Reply to
Steve Bigelow

Who said the Bay Street/Rosedale/Upper Canada College old boy network was dead?

My point is, it is 2004. There are no excuses to have scandalous patronage operation in existance at a retail level. There is a distribution case for Brewers Retail though. This monopoly is foreign owned. Labatt is owned by Interbrew, and Molson is owned by Molson Coors. This is not acceptable. This is making our own citizen shopkeepers and corporation squeezed out of a lucrative business.

Can anyone tell me any other jurisdiction is the whole world where beer isn't sold by the private sector in a non-monopoly environment? Even Norway, Sweden and Utah have privatized beer sales.

Reply to
Joe Bidwell

Would that your MP(s) would pay attention to you, but apparently that old-boy beer-biz network in Ontario is well-entrenched.

Err... Molson Coors will be a *bi-national* entity, pretty much equally owned by both the American company and the Canadian company. The most you can claim there is that the combined company will be half-owned by Coors. Labatt is majority-owned by Interbrew, yes, but doesn't Sleeman also have an interest in Brewers Retail?

It's the price Ontario is paying for trying to keep up in a global economy, while over-regulating the beer retail sector to death.

North Korea. Cuba. Saudi Arabia. Iran. Not exactly great company, are they? Even other Canadian provinces allow some non-monopoly private sector beer sales.

Yeah, but the stuff sold by the private sector in Scandinavian countries is pretty weak. Sweden's Aktienbolag "Bier Butikk" shops have the best beer selection by far.

Reply to
dgs

On Mon, 19 Jul 2004, Garrison L. Hilliard vociferated:

}Coors, Molson Confirm Merger Talks }Mon Jul 19, 2004 05:32 PM ET [...] } }Denver-based Coors has struggled of late to overcome a health-conscious }shift away from beer to wine and distilled spirits.

LOL. Yeah, guzzling Night Train and peach-flavored vodka is far healthier than drinking Coors, I'm sure.

Dr H

Reply to
Dr H

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