UPDATE 1-Miller to end licensing deal with Molson Coors Canada

Wed Feb 27, 2013 11:24am EST

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TORONTO Feb 27 (Reuters) - Miller Brewing Co, a subsidiary of SABMiller Plc, said on Wednesday it is terminating its Canadian license agreement with Molson Coors Brewing Co's Canadian arm, as it believes its partner is not doing enough to promote Miller brands in Canada.

Paul Gurr, who heads Miller operations in Canada, said the company was taking the step as part of a drive to boost its Canadian sales of brands such as Miller Lite, Milwaukee's Best and others.

"While Miller brands make up only a small percentage of Molson Coors' Canadian sales, this decision reflects our belief that there exists the opportunity to grow Miller's brands in Canada," Gurr said.

Miller said it provided Molson Coors in Canada with a six-month notice of termination, on Jan. 1. The agreement is set to be terminated as of July 22.

In a regulatory filing earlier this week, Molson Coors said it has filed a lawsuit in the province of Ontario seeking to prevent the termination of the license agreement.

"Miller alleges that we failed to meet certain volume sales targets under the license agreement," Molson said in the filing. "We do not believe Miller has any right under the license agreement or otherwise to terminate the license agreement."

Miller said it is vigorously defending itself against that action and maintains its right to terminate the agreement.

The company said it remains committed to the Canadian market and Miller trademark brands will continue to be available in Canada.

The tussle is not expected to have an impact on the partnership between the two companies in the United States. The U.S. beer market is currently dominated by the world's largest brewer, Anheuser-Busch InBev, and MillerCoors, a joint venture between Molson Coors and SABMiller.

Earlier in February, Molson Coors reported a 28 percent decline in its fourth-quarter profit as its tax bill more than doubled and beer sales slumped in Canada, the brewer's top market.

Molson's Canadian business, which accounted for about half its fourth-quarter revenue of $1.03 billion, was hit by a 20 percent rise in beer excise tax rates in the province of Quebec and the National Hockey League player lockout.

The court case between the two sides is Molson Canada 2005 V. Miller Brewing Company, in the Superior Court of Justice-Ontario, CV-12-470589.

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