Coors + Molson = Consolidation

Merger makes things more crowded at the top of the beer industry ladder

July 23, 2004 - Adolph Coors and Canadian brewer Molson made it official yesterday by announcing they intend to merge to become the fifth-largest brewer in the world. The news was overshadowed by reports that Molson-family stakeholder Ian Molson may try to make a counteroffer that could squelch the deal.


Molson Coors Brewing Co. would have annual sales of $6 billion. "This transaction allows us to create a stronger company in a consolidating global industry while preserving Molson's rich heritage as North America's oldest beer company and Canada's leading brewer," Molson Chairman Eric Molson, a cousin of Ian, said in a statement.

Approval from minority shareholders is far from certain. And other bidders are in the wings. Besides Ian Molson's expected $4 billion offer to take over Molson, Toronto buyout specialist Onex Corp. may also make an offer, according to The Globe & Mail of Toronto.

The Coors, which controls 11% of the U.S. market and 21% of the U.K., is firmly behind the deal. "I am very proud to see the company started by my great-grandfather more than 130 years ago combine with a company of Molson's caliber and heritage," Coors Chairman Peter Coors said in the announcement.

The company would have dual head offices in Denver and Montreal. Its Canadian operations would be managed from Toronto. The transaction would be structured as a share exchange, whereby Molson shareholders could either convert to shares of the new entity or elect to receive exchangeable shares on a tax-deferred basis, the companies said.

There is also speculation that a third brewer - perhaps Holland's Heineken - might still enter the picture to make a bid for both companies.

The biggest beneficiaries of a Molson-Coors' merger is likely to be Canada's growing microbreweries, one industry observer said, predicting their market share could easily double to 20% within a decade.

Sleeman Breweries Ltd. chairman and chief executive John Sleeman agreed the merger could be good for his brewery if it distracts Molson from the domestic market. Sleeman is already growing 15% a year, while sales at Molson are flat to slightly negative, Sleeman noted. But Molson remains a "large and difficult" competitor, he added.

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