Relief in the Molson boardroom
approved the $4 billion merger with Adolph Coors; the family brewer
is now safe from being an obvious takeover target, writes Kim
Hunter Gordon.
The deal needed to be approved by shareholders, a vote that analysts called "too close to predict". Rival brewer SABMiller had expressed interest in acquiring Molson, a move which would have gone against the Molson family interests but was seen by observers as a more obvious combination of companies.
Reacting to the threat of a rival bid, chairman Eric Molson announced on 13 January that, as an incentive for voting through the merger, the special dividend promised to shareholders would be further sweetened to C$5.44 per share.
The incentive seemed to sway the outcome, with 80.2 per cent of the brewer's class A shareholders and 84.3 per cent of its class B shareholders finally voting in favour of the merger.
According to reports, sexy beer ads of Brazilian beaches and nightclubs were screened while shareholders waited for votes to be tallied, reflecting Molson's strategic move taken in 2003 to invest heavily in the emerging Brazilian market.
The deal will create the world's fifth-largest brewer by volume, allowing it to compete in the rapidly consolidating global beer market with revenues of over $6 billion. It will have 15 breweries and 14,800 employees in four countries.
Molson shareholders will own 55 per cent of the combined company, with the Molson and Coors families sharing voting power. The merger is expected to bring $175 million in annual savings by 2007.
SABMiller, which had said it was interested in Molson should the Coors deal fail, declined to comment on whether it will be eyeing the new merged company with a view to a takeover. Media reports say that investors have already started forecasting that the combined Molson-Coors Company will soon be on a number of companies' shopping lists.
However, any further attempts to buy the company would face the same intransigence on the part of the Molson family in particular.
Analysts were divided about whether the new company really will be a target. Datamonitor analyst John Band said: "It is unlikely that we will see anything large happening with Molson for a while - at least not on the mergers and acquisitions front."
He explained that, in the present climate, mergers and acquisitions between brewers have only really been taking place in order to either reduce costs or to build operations in growth markets.
"It is possible that someone would want to buy Molson for its Brazilian operations but now they'd be spending too much for all the rest," he said.
He signalled that this was probably the strategic basis for the Coors-Molson merger - two publicly floated but family orientated companies who realise that on their own they are vulnerable for takeover.
Molson and Coors first announced in July 2004 that they wished to merge. The proposed merger still requires both the approval of Adolph Coors stockholders and the Quebec Superior Court. Closing of the transaction is scheduled for 9 February, when Molson Coors stock will start trading on the TSX and the NYSE.
