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Coors, Molson Announce Merger

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Coors, Molson Announce Merger

Thursday, July 22, 2004

Coors, Molson Confirm Merger Talks

DENVER — Adolph Coors Co. (RKY), the third biggest U.S. brewer, and Canadian brewer Molson Inc. (search) announced plans to merge Thursday in a deal aimed at helping them compete against the world's beermaking giants.

The combined company in what was described as a merger of equals would have annual revenues of about $6 billion and would rank fifth in the world by brewing volume, the companies said in a statement.

It will be known as Molson Coors Brewing Co., and will market brands like Coors Original and Coors Light, Molson Canadian, Keystone and Carling.

Coors chief executive Leo Kiely would become CEO and Molson chairman 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 Golden.

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 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 from 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," Eric Molson said in a statement.

The deal is subject to approval by shareholders of both companies with meetings expected in the fall and also by regulators.

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 in Thursday's announcement that the 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 (search ) and others have been stepping up their stakes in Chinese brewers.

Molson has shown signs of internal strife. Former deputy chairman Ian Molson was among five directors not re-elected or replaced on the board in June. Some directors had hoped Ian Molson would eventually succeed his cousin, Eric Molson, as chairman.

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 the company's 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.

In 2003, Coors reported net income of $174.6 million on sales of $4 billion. Volume was up 2.8 percent to 32.7 million barrels. By comparison, Anheuser-Busch, the nation's No. 1 beer company, earned $2.08 billion.

Montreal-based Molson reported a profit of about $181 million in 2003 on $1.91 billion in revenue.

Besides its Golden headquarters, Coors has a second brewery in Memphis, Tenn., and a packaging facility near Elkton, Va. Molson has operations in Canada, Brazil and the United States

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