SABMiller and Molson Coors have confirmed plans to combine their US and Puerto Rico operations.

The two brewers announced today (9 October) that they will create a joint venture targeted at creating "a stronger, brand-led US brewer with the scale, resources and distribution platform to compete more effectively in the increasingly competitive US marketplace".

The new company, which will be called MillerCoors, will have annual pro forma combined beer sales of 81m hectolitres and net revenues in the region of US$6.6bn.

The transaction is expected to generate around $500m in annual cost synergies to be delivered in full by the third full financial year of combined operations, and is expected to be earnings accretive to both companies in the second full financial year of combined operations.

Each side will each have a 50% voting interest in the joint venture and have five representatives each on its board. Based on the economic value of the contributed assets, SABMiller will have a 58% economic interest in the joint venture and Molson Coors will have a 42% economic interest.

Pete Coors, vice chairman of Molson Coors, will serve as chairman of MillerCoors, while Graham Mackay, SABMiller's CEO, will serve as vice chairman of MillerCoors. Leo Kiely, current CEO of Molson Coors, will be the CEO of the joint venture, and Tom Long, current CEO of Miller, will be appointed president and chief commercial officer.

"Given the highly complementary nature of our US assets, operations and geographic footprint, this is a logical and compelling combination that we expect will create significant value for shareholders while benefiting distributors, consumers, retailers and the market overall," said Mackay. "We look forward to working with Molson Coors to jointly develop the combined business."

Pete Coors added: "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. Creating a stronger US 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 Molson and Coors families are firmly in support of this strategic transaction."

The parties will enter into a mutual standstill agreement, which will prevent SABMiller and Molson Coors from making an unsolicited offer for the shares of the other brewer for a period of ten years following completion of the transaction. The two have also agreed to appropriate rights of first offer and last refusal in the event of either party wanting to sell its interest in the joint venture after an initial no-sale period of five years.

Final agreement on the transaction is expected by the end of this year.