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Brewing giant SABMiller PLC mentioned on Wednesday, January 12, it is interested in making a bid for Molson Inc. should the Canadian brewer's pending US$ 8 million merger with Adolph Coors Co. fall apart. "A Molson transaction would both have strategic merit and could be value enhancing to SABMiller," the London-based brewer said in a statement. "If the Coors deal is voted down by Molson shareholders, we would welcome the opportunity to discuss a potential transaction that may be attractive to both Molson shareholders and ours," the company added.

Molson rebuffed SABMiller's words saying it does not have an offer from the brewer, according to Reuters. "Molson shareholders do have a firm, tangible, quantifiable offer in front of them that has significant strategic and financial merits," said spokeswoman Sylvia Morin.

Montreal-based Molson announced its all-share merger deal with the Golden, Colorado-based Coors in July to create the world's fifth largest brewer by volume, just behind Dutch Heineken. The combined company's brands would include Coors Light and Molson Canadian. Molson and Coors shareholders are scheduled to vote in a week on the planned combination of Canada's biggest brewer and the third biggest U.S. beer company.

Opponents of the deal - including Ian Molson, who broke ranks with his family and left Molson Inc. last year - have grown more vocal as the scheduled vote has approached, and the report of London-based SABMiller's interest could add to the pressure on the supporters of the deal. According to Reuters, Bill Chisholm, an analyst at Dundee Securities Corp. in Toronto, said the latest news from SABMiller is likely designed to discourage people from approving the Coors deal. "Knowing that they would be there to be a potential buyer would limit the downside on Molson's shares if the deal does not go through," he said, noting that it is too close to tell whether the proposed plan has enough support to succeed.

SABMiller, which was founded in South Africa more than 100 years ago, brews Miller, Carling Black Label and Nastro Azzurro among other brands around the world. Its shares were down 0.3% to 837 pence (US$15.83, euro12.04) in afternoon trading on the London Stock Exchange. SABMiller, well known for its Miller, Castle and Pilsner Urquell beers, has been on the acquisition trail since moving to London in 1999, buying up U.S.-based Miller in 2002 and Italy's Peroni in 2003 and also expanding in Eastern Europe and China, Reuters said.

SABMiller would be a clear favorite to acquire Molson. InBev would be ruled out by its ownership of Labatt in Canada, while Heineken may struggle to raise the cash due to its controlling family share structure. However, Michael Palmer, president of Veritas Investment Research in Toronto, said he doesn't "know how SABMiller can buy Molson when Molson's second-largest brand is Coors Light and Coors has said it would pull it if Miller buys it."

A SABMiller-Molson linkup would have to get the blessing of Molson's chairman, Eric Molson, who has control over a large family stake in the company, and can effectively veto any deal he does not like.

Coors, based in Golden, Colorado, is the third-biggest U.S. brewer behind Anheuser-Busch and SABMiller. Molson is the No. 1 brewer in Canada, just ahead of Interbrew SA's Labatt Brewing. "Eric Molson's statements in the past have said he was not interested in any deal except the Coors deal and without his approval there's no deal possible," noted Dundee's Chisholm.

Both Molson and Coors need a two-thirds approval at their shareholder meetings next week, but it is still open for the two parties to sweeten the merger terms once more. Last November Molson said a dividend of C$3.26 would be paid on each Molson class A and class B common share.

Late last year, former Molson deputy chairman Ian Molson, a cousin of the chairman, tried unsuccessfully to launch a rival bid for the Canadian brewer, and on January 11 Ian Molson, who owns 11.5% of the voting B shares, said he will vote against the merger as it is a bad deal for Molson shareholders. But later on January 11, Molson's chief executive, Dan O'Neill, said he supported the merger as it would give the company access to an estimated US$175 million in cost savings and create a group to survive in a consolidating brewing industry.

Molson shares jumped to C$36.50 on Wednesday, January 12, their highest level since the merger was announced in July, before easing to C$36.05 on the Toronto Stock Exchange, for a gain of 75 Canadian cents. Coors shares rose $1.28 to $76.77 on the New York Stock Exchange.

Under the proposed Coors-Molson deal, the new Molson-Coors would have a market capitalization of about US$6.3 billion (EUR 4.79 billion) and would rank fifth globally in terms of both revenue and number of barrels sold. Under the Coors-Molson agreement, Molson shareholders would control about 55% of the combined company, which would remain largely in the hands of the Molson and Coors families. The combined company would hold a 43 percent share of the Canadian beer market and 11% of the U.S. market.


15 January, 2005