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10-10-2007, 03:49 PM
Since I know how much y'all love good beer :rolleyes:
Emily Fredrix, The Associated Press
MILWAUKEE - The nation's second- and third-largest brewers, Miller and Coors, are planning to blend their U.S. operations to help them compete against industry leader Anheuser-Busch.
The deal, announced Tuesday, will place almost 80 percent of the U.S. beer market in the hands of just two companies, making it a likely target for a tough antitrust review and perhaps pushing Anheuser-Busch to find a merger partner.
Miller Brewing has about 18 percent of the market, as of last year. Molson Coors Brewing has almost 11 percent, and Anheuser-Busch just under half the market.
"This is bad news for Anheuser," said Nikolaas Faes, an analyst at Exane BNP Paribas in London. "Molson and Coors are tiny competitors, but in a joint venture they are much more formidable."
The venture formed by SABMiller, based in London, and Denver-based Molson Coors will sell 69 million barrels of beer annually with $6.6 billion in revenue, the companies said. Anheuser-Busch, whose brands include Budweiser and Michelob, sold 102.3 million barrels in the U.S. last year and had net revenue of $15.7 billion.
The new company will be jointly owned and distribute brands from Miller Lite, Coors and Molson to Peroni in the world's most profitable beer market.
The deal will have to pass an antitrust review by either the Federal Trade Commission or the Department of Justice. But the emergence of many smaller brewers has made the industry more competitive than it was a decade ago, said William MacLeod, an attorney at Kelley Drye Collier Shannon and a former antitrust official at the Department of Justice.
Regulators might even see the pairing as helping offset Anheuser-Busch's dominance, Mark Swartzberg, a Stifel Nicolaus analyst, wrote in a research note.
The move could prompt a long-rumored deal between Anheuser-Busch and InBev, the world's largest brewer by volume, said Juli Niemann, an analyst with Smith Moore in St. Louis.
"They're going in the inevitable direction, and I think that's the InBev direction," she said.
Such pairings deliver huge cost savings, she said, and a deal with InBev, known for beers like Stella Artois, would help Anheuser-Busch.
Precise financial terms of the Miller-Coors deal were not disclosed. SABMiller will have a 58 percent economic interest in the venture, and Molson Coors will own 42 percent. But they will have equal voting interests.
The companies said the venture will result in cost savings of $500 million over three years, mainly from reducing shipping distances, optimizing production and eliminating overlapping corporate and marketing services.
Pete Coors, vice chairman of Molson Coors, will be chairman of the new company, with Molson Coors Chief Executive Leo Kiely the CEO. Tom Long, CEO of Miller, will be president and chief commercial officer.
Kiely said beer sales and profits industrywide are dwindling because of rising sales of wine, spirits and craft beers.
Beer Marketer's Insights reports overall beer sales were up just over 1 percent last year, while crafts were up 11-12 percent, imports 7-8 percent and lights in the low single digits. Dragging the industry down, executive editor Eric Shepard said, is mainstream, nonlight beers, such as Bud, Miller and Coors.
The merger has long been expected, he said, but the question now is how Miller Lite and Coors Light will keep their own identities.
"You have two powerhouse light brands," he said. "Can they figure out how to do that and not get in each other's way?"
Bud Light is the nation's top selling light beer, by far, he said, while Miller Lite and Coors Light have long been second and third, sometimes swapping positions.
Consumers won't notice much difference after the merger, he said, though they can probably expect to see more national marketing campaigns.
The company will decide on a location for the new headquarters, executives said, though they promised to keep a presence in Miller's hometown of Milwaukee and Coors' headquarters in Golden, Colo. Miller has 6,000 employees and eight breweries, and Coors has 4,000 employees and two breweries.
The announcement sent Molson Coors stock to a record high and its biggest gain since a merger formed the company in February 2005.
Shares of Molson Coors Brewing hit a 52-week high of $57.68 on the news Tuesday. The stock rose $5.32 to $56.15. SABMiller shares rose 1.43 percent in London. Anheuser-Busch shares fell 46 cents to $51.57.
Emily Fredrix, The Associated Press
MILWAUKEE - The nation's second- and third-largest brewers, Miller and Coors, are planning to blend their U.S. operations to help them compete against industry leader Anheuser-Busch.
The deal, announced Tuesday, will place almost 80 percent of the U.S. beer market in the hands of just two companies, making it a likely target for a tough antitrust review and perhaps pushing Anheuser-Busch to find a merger partner.
Miller Brewing has about 18 percent of the market, as of last year. Molson Coors Brewing has almost 11 percent, and Anheuser-Busch just under half the market.
"This is bad news for Anheuser," said Nikolaas Faes, an analyst at Exane BNP Paribas in London. "Molson and Coors are tiny competitors, but in a joint venture they are much more formidable."
The venture formed by SABMiller, based in London, and Denver-based Molson Coors will sell 69 million barrels of beer annually with $6.6 billion in revenue, the companies said. Anheuser-Busch, whose brands include Budweiser and Michelob, sold 102.3 million barrels in the U.S. last year and had net revenue of $15.7 billion.
The new company will be jointly owned and distribute brands from Miller Lite, Coors and Molson to Peroni in the world's most profitable beer market.
The deal will have to pass an antitrust review by either the Federal Trade Commission or the Department of Justice. But the emergence of many smaller brewers has made the industry more competitive than it was a decade ago, said William MacLeod, an attorney at Kelley Drye Collier Shannon and a former antitrust official at the Department of Justice.
Regulators might even see the pairing as helping offset Anheuser-Busch's dominance, Mark Swartzberg, a Stifel Nicolaus analyst, wrote in a research note.
The move could prompt a long-rumored deal between Anheuser-Busch and InBev, the world's largest brewer by volume, said Juli Niemann, an analyst with Smith Moore in St. Louis.
"They're going in the inevitable direction, and I think that's the InBev direction," she said.
Such pairings deliver huge cost savings, she said, and a deal with InBev, known for beers like Stella Artois, would help Anheuser-Busch.
Precise financial terms of the Miller-Coors deal were not disclosed. SABMiller will have a 58 percent economic interest in the venture, and Molson Coors will own 42 percent. But they will have equal voting interests.
The companies said the venture will result in cost savings of $500 million over three years, mainly from reducing shipping distances, optimizing production and eliminating overlapping corporate and marketing services.
Pete Coors, vice chairman of Molson Coors, will be chairman of the new company, with Molson Coors Chief Executive Leo Kiely the CEO. Tom Long, CEO of Miller, will be president and chief commercial officer.
Kiely said beer sales and profits industrywide are dwindling because of rising sales of wine, spirits and craft beers.
Beer Marketer's Insights reports overall beer sales were up just over 1 percent last year, while crafts were up 11-12 percent, imports 7-8 percent and lights in the low single digits. Dragging the industry down, executive editor Eric Shepard said, is mainstream, nonlight beers, such as Bud, Miller and Coors.
The merger has long been expected, he said, but the question now is how Miller Lite and Coors Light will keep their own identities.
"You have two powerhouse light brands," he said. "Can they figure out how to do that and not get in each other's way?"
Bud Light is the nation's top selling light beer, by far, he said, while Miller Lite and Coors Light have long been second and third, sometimes swapping positions.
Consumers won't notice much difference after the merger, he said, though they can probably expect to see more national marketing campaigns.
The company will decide on a location for the new headquarters, executives said, though they promised to keep a presence in Miller's hometown of Milwaukee and Coors' headquarters in Golden, Colo. Miller has 6,000 employees and eight breweries, and Coors has 4,000 employees and two breweries.
The announcement sent Molson Coors stock to a record high and its biggest gain since a merger formed the company in February 2005.
Shares of Molson Coors Brewing hit a 52-week high of $57.68 on the news Tuesday. The stock rose $5.32 to $56.15. SABMiller shares rose 1.43 percent in London. Anheuser-Busch shares fell 46 cents to $51.57.