US: Molson Coors faces fresh legal attack
The Molson Coors merger is under a fresh attack from a disgruntled shareholder, who is claiming that the two companies issued "false" and "misleading" facts in the run up to asking for shareholder approval for the deal.
Brian Crombie is seeking a class action lawsuit claiming that shareholders were told "the merger would result in synergies and cost savings and that the combination of Coors and Molson would result in a substantially stronger and more profitable company."
His move comes after the newly-combined entity saw its share price fall 20% on the back of first quarter earnings that roundly disappointed the market.
Crombie's lawsuit claims investors were wrongly led to believe that Coors was performing better than it actually was. It continues that the companies violated the terms of the merger by failing to disclose that Coors was performing "well below plan and consensus estimates".
Crombie's lawsuit is the latest in a line of legal actions facing the North American brewer.
At the beginning of June, Molson Coors was approached by federal regulators. A filing with the Securities and Exchange Commission said that regulators asked the company to provide documents and other information about the merger earlier this year of Adolph Coors and Molson.
The company also confirmed in the filing that several class-action lawsuits were filed in May against the company in the US and Canada, alleging that Molson Coors and some of its officers and directors misled shareholders by not disclosing first-quarter business trends before shareholders voted on the merger in January and February.
The company "believes that the lawsuits are without merit and will vigorously defend them," the filing said.
The SEC told the brewer that its request for merger documents should not be viewed as an indication that any laws were broken, Molson Coors said. The company added that it is cooperating with the SEC's inquiry, which also requests information about its first-quarter financial results.
At the end of April, Molson Coors reported a first-quarter loss of US$46.5m, mainly due to special charges from the merger and lower sales in each of its four key markets. Excluding one-time items, it said its loss came to US$5.1m. On 2 May, however, Molson Coors revised the adjusted loss to US$8.4m to reflect a change in how it accounted for a minority interest Brazilian shareholder.
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