molson coors sabmiller combine us operations

The companies are projected to have combined annual beer sales of 69 million barrels with revenue of about $6.6 billion.

Molson Coors Brewing Co. and SABMiller PLC plan to combine their U.S. and Puerto Rican operations, creating a beer powerhouse with annual revenue of about $6.6 billion.

The venture will be called MillerCoors. The two companies will share control of the venture, but because of the economic value of their respective units SABMiller will have a 58% economic interest to Molson Coors’s 42% interest. The companies expect $500 million in annual cost savings.

The deal is expected to close by the end of 2007. Both companies’ business will be conducted separately until the deal completes.

“This transaction is driven by the profound changes in the U.S. alcohol beverage industry that are confronting both of our companies with new challenges,” said Pete Coors, Vice Chairman of Molson Coors.

“Consumers are broadening their tastes and are increasingly looking for greater choice and differentiation; wine and spirits companies are encroaching on traditional beer occasions, and global beer importers and craft brewers are both taking a larger share of volume and profit growth,” he said. “Creating a stronger U.S. brewer will help us meet these challenges, compete more effectively and provide U.S. consumers with more choice, greater product availability and increased innovation.”

The Beer Institute, a Washington-based industry group, projects total U.S. beer sales, by barrel, will rise 1.5% this year.

In the U.S., beer giants Miller, Anheuser-Busch Cos. and Molson Coors are struggling to increase sales of their flagship domestic beers, as beer drinkers increasingly reach for imports and small-batch “craft” brews. Miller’s prowess in the American beer industry has been gradually slipping since the 1980s, when Miller Lite held the lead in the light-beer wars with its famed “Tastes Great, Less Filling,” ad campaign, The Wall Street Journal reported.

Last year, Miller Lite lost market share to the best-selling U.S. beer, Bud Light. Miller’s other brands, such as Miller High Life and Miller Genuine Draft, have stumbled for several years. In the year ended March 31, Miller’s earnings before interest, taxes and amortization slid 17%, making it the worst-performing of SABMiller’s regional divisions. North American sales fell 1% to $4.9 billion.

SABMiller and Molson Coors said they expect the combined brand portfolio, scale and combined management strength of the joint venture will allow it to better compete in the U.S marketplace, improving the standalone operational and financial performance of both Miller and Coors.

“As a result of this combination, Miller and Coors will be able to provide more focused support for our flagship brands, while taking full advantage of consumers’ demand for imported and craft brands and innovative products,” said Molson Coors Chief Executive Leo Kiely. “Both companies have a lot of momentum in their businesses today, and I am confident this will accelerate as we adopt the best practices of both organizations.”

Peter Coors will serve as chairman of the venture, while Kiely will be CEO.

7ads6x98ycss.php