DENVER – Adolph Coors Co. (RKY), the nation's third-biggest brewer, and Canada's Molson Inc. (search) announced plans to merge Thursday in a deal that would create a North American giant to compete against the world's beermaking titans.
The combined company created by the deal, which was described as a merger of equals, would have annual revenues of about $6 billion and rank fifth in the world by brewing volume, the companies said.
It will be known as Molson Coors Brewing Co., and market brands like Coors Original and Coors Light, Molson Canadian, Keystone and Carling.
The deal would merge two family-led breweries both founded more than a century ago. Golden-based Coors trails Anheuser-Busch Co. Inc. (BUD) and SABMiller (search) in the U.S. brewing business, while Montreal-based Molson is neck-and-neck with Interbrew SA's (search) Labatt Brewing in Canada.
"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," said Coors chairman Peter H. Coors (search), who is running for the U.S. Senate in Colorado.
"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," chairman Eric Molson (search) said in a statement.
The deal is subject to regulatory and shareholder approval.
A former Molson executive could create a hitch in the plans. The Wall Street Journal reported Thursday that former Molson deputy chairman Ian Molson (search) was expected to make an offer to acquire the company for as much as $4 billion. The offer would value the stock at about $30 a share, which would create a premium of more than 30 percent of the stock price before the merger was announced — something the Coors offer lacks.
Ian Molson and Eric Molson, his cousin, have clashed about the brewery. Ian Molson resigned from the board in May over disagreements with his cousin.
The Ian Molson offer would come from a group of investors and a possible corporate partner, the Journal said, citing sources close to the situation.
Molson chief Daniel J. O'Neill declined to comment on the report, while Eric Molson said there is a good deal of support for the Coors merger. "We'll have to go through the process properly," he said.
Molson shares rose 3 percent to $26.99 (35.70 Canadian dollars) on the Toronto stock market Thursday, while Coors shares fell $1.54, or 2 percent, to $73.19 on the New York Stock Exchange.
Harry Schuhmacher, editor and publisher of the trade publication Beer Business Daily, said he thought the merger would be a good deal for shareholders, given the $175 million in synergies in areas such as ramping up Molson breweries in Toronto and Montreal.
"If they can wring that many synergies out of the deal that's good," he said.
Schuhmacher also said he thought Ian Molson would have a difficult time trying to stop the merger, given that he has about 10 percent of the voting stock.
If the Coors-Molson deal goes through, Coors chief executive Leo Kiely would become CEO and Eric Molson would become chairman.
The company will have executive headquarters in Denver and Montreal. Its operations in Canada will be managed from Toronto, and its U.S. operations will be managed from suburban Golden.
The plan calls for Coors shareholders to receive one share of Molson Coors for each share of Coors.
Each Molson Class B share will be exchanged for a 0.126 voting share and 0.234 non-voting share of Molson Coors. Each Molson Class A share will be exchanged for 0.360 non-voting share of Molson Coors.
The merger would require approval of two-thirds of each class of the Molson shareholders. The Molson family owns 55 percent of the voting stock. It would also require majority approval of each class of Coors stockholders.
Analysts have been skeptical of the rumored deal, saying they were uncertain how it would benefit the companies or save money. The U.S. market is flat and companies have begun working together to tap emerging markets overseas, particularly in China and South America.
But Coors and Molson said their combination should generate $175 million a year by 2007 in cost savings and new revenues.
In 2002, Molson acquired Kaiser in Brazil and Coors acquired the British Carling brands. Anheuser-Busch, SABMiller, Interbrew SA and others have been stepping up their stakes in Chinese brewers.
The new company will have a 15-member board, including five nominated by the Molson family board members, five by Coors family board members and three elected by non-voting shareholders. Kiely and Daniel J. O'Neil, the Molson CEO who will be vice chairman of the combined company, will also be directors.
John Molson founded the company that bears his name in 1786. Coors was established in 1873 by Adolph Coors and Jacob Schueler. The voting stock in each is still controlled by descendants of the founders, who include Peter H. Coors.
Also Thursday, Coors said its second quarter net income dropped 5.6 percent to $72 million, or $1.90 per share, citing a temporary reduction in the company's tax rate. Sales increased 4.6 percent to $1.15 billion.