Stock Market Update - Tue Oct 09 09:18:36 EDT 2007

SABMiller and Molson Coors Brewing Co. (TAP 50.83) plan to combine their U.S. operations in a joint venture, which will be called MillerCoors, in a move to compete more effectively with larger brewers such as Anheuser-Busch (BUD 52.03). 

Given the increasingly competitive U.S. marketplace, with wine and spirits companies encroaching on traditional beer occasions, the new company will combine complimentary assets and create a stronger brewer with greater scale and resources to better market its brands and compete with larger rivals. 

Under the agreement, the companies will each have a 50% voting interest in the venture.  However, SABMiller will have a 58% economic interest in the new company and Molson Coors will have 42% ownership.  The companies did not disclose the precise financial terms. 

The new company is projected to have combined beer sales of 69 million U.S. barrels and net revenues of approximately $6.6 billion.  SABMiller and Molson Coors, the second and third largest brewers in the U.S., respectively, expect the joint venture to result in annual cost savings of about $500 million, which will be fully recognized by the third full year of combined operations. 

The transaction is expected to be accretive to earnings for both companies in the second full financial year of combined operations.  Final approval of the deal is expected by the end of 2007, following necessary regulatory and shareholder approvals. 

--Richard Jahnke, Briefing.com