miller coors

A British beer-industry analyst thinks it's "likely" the Miller Brewing Co. will buy Colorado's Coors Brewing Co., reigniting speculation that such a deal could happen.

Coors admits it wants to grow, possibly through a merger or acquisition, but a company spokeswoman declined comment about a transaction with Miller Brewing.

On the other hand, the biggest stumbling block to a Coors Brewing sale is the Coors family itself, which founded the company and still controls it.

A report by analyst Shai Hill of London-based HSBC Holdings plc, quoted in the Feb. 9 issue of the Beer Marketer's Insights trade publication, said a Miller-Coors deal could help Miller achieve the "stabilization of market share" it needs to deliver strong profit growth.

"The foremost obstacle is the agreement of the Coors family," according to the report.

Coors family members own the biggest block of stock in the publicly traded Adolph Coors Co., the holding company that owns the Golden-based Coors Brewing operating company. They would have to consent to a sale or merger.

The holding company trades on the New York Stock Exchange under the symbol RKY.

Peter Coors, chairman of Adolph Coors Co. and Coors Brewing, and his uncle, Bill Coors, the holding company's vice chairman, together own about 4.2 million shares, according to Yahoo! Finance. The brewer's biggest institutional investor, Capital Research and Management Co., holds 1.5 million shares.

The 130-page HSBC analysis is about Miller Brewing's new parent, London-based SABMiller plc.

HSBC would not sell a copy of the report to the Denver Business Journal. The global banking and financial services company shares economic and investment research with media, but not equity reports on individual companies, according to HSBC spokeswoman Joanne McGilway in London.

Several investment bankers think Coors is "the only logical [acquisition] target" among U.S. brewers because it must grow organically or be purchased to expand, according to a December 2003 mergers and acquisition report by Securities Data Publishing. And Coors "is open to talking deals," said the report.

"Our vision is to become a top-five global brewer, which could involve both organic and M&A growth," said Melissa Gelfand, Coors' corporate communications manager.

Miller Brewing Co. and Coors Brewing Co., the nation's second- and third-largest brewers, are combining their operations, creating a bigger challenger to Anheuser-Busch Cos. - but also raising the possibility of future job cuts at Miller's Milwaukee headquarters.

None of Miller's six breweries, or the two breweries operated by Coors, will be closed as the result of this morning's surprise announcement, said Pete Marino, Miller spokesman.

But administrative jobs in Milwaukee, and at the Coors offices in Golden, Colo., will be analyzed as the merged company looks to reduce costs, he said.

"It's safe to assume there will be some reductions," Marino said. But it's too early to estimate the extent of those job cuts, and where they will occur, he said.

Miller has 1,700 employees in Milwaukee, with 800 employees in the corporate offices.

The merged company, dubbed MillerCoors, will maintain a presence in both Milwaukee and Golden, Marino said. But no decision has been made yet as to where the headquarters for MillerCoors will be, he said.

Pete Coors, vice chairman of Molson Coors Brewing Co., the Montreal-based corporate parent of Coors, will be chairman of MillerCoors. Graham Mackay, chief executive officer of SABMiller Plc, the London-based brewer that owns Miller, will be vice chairman of MillerCoors.

Leo Kiely, CEO of Molson Coors, will be the CEO of MillerCoors, and Tom Long, CEO of Miller, will be president and chief commercial officer of the merged company.

SABMiller and Molson Coors will each have a 50% interest in the joint venture, and have five representatives each on its board of directors. Based on the value of the assets, SABMiller will have a 58% economic interest in MillerCoors, and Molson Coors will have a 42% economic interest.

MillerCoors will have annual beer sales of 69 million barrels, roughly 29% of the U.S. market, and revenue of $6.6 billion. Anheuser-Busch has a market share of around 48%, according to trade publication Beer Marketer's Insights.

SABMiller and Molson Coors expect the merger to generate $500 million in annual cost savings by the third full year of combined operations. The merger is subject to reaching a final agreement, and obtaining clearance from antitrust regulators.

The merger will help Miller and Coors compete more effectively with Anheuser-Busch, as well as with other beverage companies, including wine and spirits makers, Marino said




The combined company will have annual revenue of $6.6 billion and annual sales of 69 million barrels. The new operation amounts to a challenge to the leading U.S. brewer, Anheuser Busch (BUD - Cramer's Take - Stockpickr), which owns more than 40% of the U.S. beer market.

The brewers said SABMiller will own 58% of the unit, which will operate in the U.S. and Puerto Rico but not Molson Coors' stronghold market of Canada. Molson Coors will own 42%. The sides will share equal voting power.

"This transaction is driven by the profound changes in the U.S. alcohol beverage industry that are confronting both of our companies with new challenges," said Molson Coors Vice Chairman Pete Coors. "Consumers are broadening their tastes and are increasingly looking for greater choice and differentiation; wine and spirits companies are encroaching on traditional beer occasions, and global beer importers and craft brewers are both taking a larger share of volume and profit growth. Creating a stronger U.S. brewer will help us meet these challenges, compete more effectively and provide U.S. consumers with more choice, greater product availability and increased innovation. The Molson and Coors families are firmly in support of this strategic transaction."

The combination of the businesses is expected to result in identified annual cost synergies of $500 million, to come from optimization of production over the existing brewery network, reduced shipping distances, economies of scale in brewery operations and the elimination of duplication in corporate and marketing services.


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"The name of the company is gonna be MillerCoors."



This morning on Newsradio 620 WTMJ's "Wisconsin's Morning News," Miller's Pete Marino announced the joint venture by the parent companies of Miller and Coors. They've signed a letter of intent to combine their U.S. operations.



The new company will produce 69,000,000 barrels of beer in the U.S. and have net revenues of $6,600,000,000.



"This just really allows us to be a stronger, more competitive U.S. brewer," said Marino.



"The combined company is really gonna be able to realize significant synergies and cost savings in this deal. Three years from now, the initial assessment of the synergy value of the deal is estimated to be about $500,000,000 annually



Current Miller CEO Tom Long will serve as president of the new company. Pete Coors, the vice chairman of Molson Coors, will serve as chairman.



The group will continue to produce current Miller products like Miller Lite and Miller High Life, new spin-off Miller Chill, and Leinenkugel's.



"We're Milwaukee's hometown beer, and we'll always be that, so we hope people will continue to choose Miller Lite, Miller High Life, etc.," said Marino.



Marino says MillerCoors will continue its commitment to the Brew City.



"Miller's been part of Milwaukee for more than 152 years, and we plan to be here far into the future. We're committed to maintaining ongoing operations in the Milwaukee area, and the Milwaukee brewery will remain open."



MillerCoors will still rank second in the U.S. in beer production. Budweiser made 102,000,000 barrels of beer in 2006.