The North American brewers Molson and Adolph Coors have announced they are to merge, in a deal worth US$6 bln.

The news came at the end of a press release for Molson's first quarter results.

"On 22 July, 2004, the corporation entered into an agreement with Coors to create a new company that would become the fifth largest brewer in the world as measured by volume of beer sold," Molson said.
 
The transaction is structured as a share exchange whereby Molson Inc. shareholders can either convert their shares to shares of the new entity or can elect to receive exchangeable shares on a tax deferred basis.

The new entity is to be called Molson Coors Brewing Company and will be listed on the New York Stock Exchange and the Toronto Stock Exchange.

The transaction is subject to shareholder approval.

There is still specualtion among investors, however, that another global brewer will launch a rival bid for either Molson or Coors to stop the deal.

Late yesterday Heineken, which heads the list of potential suitors, refused to comment, calling the reports that it was interested mere "speculation". 

With combined beer sales of 60m hectoliters (51m US barrels), Molson Coors Brewing Company will be the world's fifth largest brewing company by volume, with pro-forma combined net sales of US$6.0 billion, EBITDA of US$1.0 billion and free cash flow of US$707m for the 12 month period ended March 31, 2004.

In addition, the combination is expected to generate approximately US$175m in annualized synergies by 2007, with half of these benefits achieved within 18 months following completion of the merger. The transaction is expected to be earnings accretive(1) to the shareholders of both companies within the first full year of combined operations.

The transaction brings together Coors, founded in 1873, and the third-largest brewer in the US with an 11% market share, and the second-largest brewer in the UK with a market share of 21%, with Molson, North America's oldest beer company, founded in 1786 and Canada's leading brewer with a 43% market share, and the third-largest brewer in Brazil, where it has an 11% market share.

"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," said Eric H. Molson, chairman of Molson. "We are extremely pleased to be combining with Coors, one of the world's most respected brewers, in such a strategically compelling merger. We look forward to working together to realize the full potential of the new company."

Peter H. Coors, chairman of Coors, said: "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. This historic transaction combines 350 years of brewing excellence and will create a dynamic and competitive organization able to deliver long-term value to shareholders while continuing to be an important contributor to the communities in which we operate."