SABMiller and Molson Coors to Combine U.S. Operations in Joint Venture

10/10/07 SABMiller plc and Molson Coors Brewing Company have signed a letter of intent to combine the U.S. and Puerto Rico operations of their respective subsidiaries, Miller and Coors, in a joint venture to create a stronger, brand-led U.S. brewer with the scale, resources and distribution platform to compete more effectively in the increasingly competitive U.S. marketplace.

The new company, which will be called MillerCoors, will have annual pro forma combined beer sales of 69 million U.S. barrels (81 million hectoliters) and net revenues of approximately $6.6 billion. Pro forma combined EBITDA will be approximately $842 million1. SABMiller and Molson Coors expect the transaction to generate approximately $500 million in annual cost synergies to be delivered in full by the third full financial year of combined operations. The transaction is expected to be earnings accretive to both companies in the second full financial year of combined operations. Closing of the transaction is subject to reaching final agreement, obtaining clearance from U.S. competition authorities, certain other regulatory clearances and third-party consents, as required.

SABMiller and Molson Coors will each have a 50% voting interest in the joint venture and have five representatives each on its Board of Directors.  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.  Graham Mackay, SABMiller 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. 

Commenting on the transaction, Graham Mackay, Chief Executive of SABMiller, said, "We are excited by the enhanced prospects for growth and the considerable benefits to all stakeholders that this joint venture offers.  Given the highly complementary nature of our U.S. 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.  We look forward to working with Molson Coors to jointly develop the combined business.”

Pete Coors, Vice Chairman of Molson Coors, said, “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.  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.  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 Molson and Coors families are firmly in support of this strategic transaction.”

Leo Kiely, Chief Executive of Molson Coors, said, “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.  Both companies have a lot of momentum in their businesses today, and I am confident that this will accelerate as we adopt the best practices of both organizations.  I am delighted to have the opportunity to be part of such a dynamic team that will mesh truly great brewing traditions, management teams, employees and cultures, while retaining both companies’ commitment to social responsibility and the communities in which we operate.”

Tom Long, Chief Executive and President of Miller, said, “Many important stakeholders will see clear benefits from the new company.  Distributors will benefit from a robust brand portfolio, strengthened marketing investments, reduced complexity and costs, and enhanced relationships and coverage with large chain retailers.  Retail customers will have an even stronger partner to drive consumer demand through product and packaging innovation, space optimization and enhanced retail execution.  Our employees will have the opportunity to work for a stronger and more competitive player in the U.S. beer industry.  And the communities where we do business will see a faster growing enterprise providing important economic benefits.”