How Molson gains from big beer merger

Article Excerpt

MOLSON COORS BREWING CO. $83 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 185.0 million; Market cap: $15.4 billion; Price-to-sales ratio: 4.0; Dividend yield: 2.0%; TSINetwork Rating: Average; www.molson coors.com) jumped 20% in response to Anheuser-Busch InBev’s offer to buy rival brewer SABMiller plc. In 2008, Molson Coors merged its U.S. brewing operations with those of SABMiller to form MillerCoors. Each company has a 50% voting interest in this joint venture, but SABMiller gets 58% of the profits, while Molson Coors gets 42%. To satisfy competition regulators, a combined Anheuser-Busch InBev and SABMiller would probably have to sell its stake in the MillerCoors joint venture. Molson Coors has a right of first refusal over any sale and would probably buy SABMiller’s stake. This would cost around $10 billion, which is a high 74% of Molson Coors’s market cap. Still, gaining control of MillerCoors would let the company realize more cost savings: since 2008, MillerCoors has saved roughly…