MOLSON COORS BREWING CO. $41 - New York symbol TAP

MOLSON COORS BREWING CO. $41 (New York symbol TAP;
Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 180.7 million; Market cap: $7.4 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.1%; TSINetwork Rating: Average; www.molsoncoors.com) has agreed buy StarBev L.P., which owns nine breweries in central and eastern Europe. The deal will close by June 30, 2012.

Molson Coors will pay $3.5 billion for StarBev. The company held cash of $1.1 billion at the end of 2011, so it will have to borrow most of the funds it will need to complete this purchase. Molson Coors’long-term debt of $1.9 billion is a moderate 26% of its market cap, so it can comfortably afford to borrow more money.

Big acquisitions like this are risky. However, Molson Coors’ brewing expertise and strong negotiating position with suppliers should let it cut StarBev’s yearly costs by $50 million by 2015. Molson Coors can also use StarBev’s distribution networks to sell more Coors Light and Carling beers in Europe.

Molson Coors is a buy.

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