E-Malt.com News article: 3977

Canada: Molson Inc. Chairman Eric Molson, the company's controlling shareholder, said he will not sell the brewer after SABMiller Plc said on January 12 it may consider bidding for the beer maker if a proposed $3.4 billion merger with Adolph Coors Co. fails, according to Bloomberg. “This company is not for sale and the merger of equals with Coors is the only option on the table on Jan. 19,'' Molson said in a statement. Shareholders are set to vote next week on the proposal that would create the world's fifth-largest brewer.

Eric Molson, 67, is trying to sway investors to support the accord amid rising opposition from some shareholders. The plan needs the support of two-thirds of voting shareholders to pass. A positive result is in doubt after several funds, including Jarislowsky Fraser Ltd. with 4.5 million shares, said they plan to vote against the merger because it doesn't offer them a premium and would join two brewers with declining market share.

Molson, whose family has run the Montreal-based brewer since 1786, also said he won't convert the company to an income trust, an option favored by many investors and analysts. Income trusts own assets that have steady cash flow and distribute the money in quarterly or monthly payments to investors. Eric Molson controls 50.1 percent of the company's Class B voting shares.

An income trust wouldn't allow Molson to expand the company because most of the earnings are paid out to investors, he said in the statement.

The company broke into international markets, most recently by buying Brazil's Cervejarias Kaiser SA for $765 million in March 2002. Molson wrote down the value of that unit by C$210 million last October as it lost market share to larger Brazilian rival Cia. de Bebidas das Americas, now owned by InBev NV. “Eric has closed the door on an option (income trust) that a lot of people thought made sense, myself included'' said Jim Hall, a fund manager at Calgary-based Mawer Investment Management, who recently sold his 300,000 Molson shares.

Hall said many investors wanted Molson to abandon its international growth strategy because it has been a failure and because an income trust would stop the company from expanding abroad. Hall said he opposed the merger because he didn't have confidence in the combined company. Eric Molson's opposition to selling the company shouldn't surprise investors because he has long held that position, Hall said in a telephone interview.

Molson's widely traded Class A shares rose 60 cents, or 1.7 percent, to C$35.90 at 4:34 p.m. on the Toronto Stock Exchange. Coors, based in Golden, Colorado, gained 54 cents to $76 in New York. Shares of SABMiller fell 4.5 pence to 835 pence in London. “If the Coors deal is voted down by Molson shareholders, we would welcome the opportunity to discuss a potential transaction,'' Nigel Fairbrass, a spokesman for London-based SABMiller, said in a telephone interview earlier today.

SABMiller Chief Executive Graham Mackay has been expanding outside South Africa through acquisitions to compete with Anheuser-Busch Cos., the world's biggest brewer. He doubled the U.K. company's size by buying Miller Brewing Co. of the U.S. for $5.6 billion. SABMiller, which brews such brands as Miller Genuine Draft Pilsner Urquel, Holsten and Carling Black Label in Canada, faces other obstacles besides Eric Molson.

An acquiring company could also lose a profitable brewing agreement with Coors. Coors of Golden, Colorado, has the right to end a brewing accord that generates 20 percent of Molson's profit if the Canadian company sells control or a ``significant investment'' to a direct or indirect competitor. Coors considers SABMiller as a competitor.

Coors spokeswoman Laura Sankey said in a telephone interview the company would exercise that right if SABMiller were to acquire Molson. She also said meetings planned for this week between Coors executives and some shareholders have been postponed to Monday or Tuesday because of scheduling conflicts. She declined to identify which investors the executives had expected to meet. Eric Molson said the merger ``will secure a profitable relationship with Coors that represents 20 percent of earnings before interest and taxes.''



15 January, 2005