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Canada: Dissident family member Ian Molson is keeping his options open, telling Canadian securities regulators he may try to acquire additional shares in the family brewing company that intends to merge with Adolph Coors Co. Ian Molson's filing with Ontario securities regulators, made July 28 but first reported by Canada's National Post on Thursday, suggests that the former Molson deputy chairman may indeed follow through on reported efforts to block the Coors deal and acquire Molson himself, at a premium for current stockholders, Rocky Mountain News posted on August 9.

That's more than they'll get from Coors under a deal struck between the Colorado brewer and Molson, run by Chairman Eric Molson. In the merger of equals announced last month, Molson shareholders would swap their stock, at no premium, for shares in a new Molson Coors Brewing Co.

The Coors family and Eric Molson have crafted a deal in which they'll share control of the company. Additional Molson shares owned by Eric Molson's family give him additional power in the long run.

Ian Molson, however, is reported to be unhappy with the deal. The Wall Street Journal and various Canadian media outlets have reported that he's readying a competing bid with the aid of investment groups and, possibly, brewing company Heineken NV.

Hopes for a competing bid had been dying out. Molson shares traded at a premium to the Coors offer in the days after the deal, suggesting hopes for a richer offer. However, Molson stock slipped below the offer price last Friday.

That trend now has reversed. Coors stock dipped almost a dollar to $66.52 Thursday, its lowest closing price since early June. Molson shares increased, and the premium is now 2.5 percent, the highest markup since the day the merger was announced - also the day Ian Molson's supposed intentions were revealed.

In the filing with the Ontario Securities Commission, Ian Molson indicated that he may change the status of his 10 percent voting stock, now listed as investment-only.

Although Canadian and American securities laws differ, major holders of a company's stock generally have to declare whether they're owning shares as a simple investment or if they intend to actively influence the affairs of the company.

"Given recent developments regarding Molson Inc., the offeror (Ian Molson) is currently considering his options regarding his holdings in the company, including potential acquisitions of additional shares, either alone or with others," the July 28 report said.

Ian Molson was a deputy chairman and board member of Molson until he resigned in May, saying his cousin Eric Molson refused to work with him.

Molson spokeswoman Sylvia Morin said Thursday that company officials were unsure what Ian Molson's intentions were, based on the report in the National Post. "We don't know how to interpret that at this point in time," she said. A Coors spokeswoman declined comment.

Any bid for Molson requires two-thirds approval from both the voting and the typically nonvoting Molson shares. Eric Molson and his family members control about 55 percent of Molson stock.

The Molson-Coors merger requires majority approval from both the voting and the typically nonvoting Coors shares. The Coors family owns all voting shares and about one-third of the nonvoting shares. The Molson-Coors combination would take the world's 13th- and eighth-largest brewers and create the fifth-largest. Molson Coors Brewing Co. would have about $6 billion in annual sales and a market value of about $6 billion.

However, even with $175 million in proposed cost savings, Molson Coors would remain less profitable than its larger peers, mostly because of Coors' low profit margins.

Some analysts speculate that Ian Molson favors a merger with Dutch giant Heineken. Heineken owns a 20 percent stake in Molson's struggling Brazilian venture - Cervejarias Kaiser - which, most analysts concede, badly needs a face-lift.

Michael Van Aelst of CIBC World Markets said Ian Molson is believed to have close ties to one of the family members of Heineken and considers the Dutch brewer a better partner for Molson.

"We would agree, given Heineken's larger scale (possibly providing better procurement benefits, etc.), the potential for Molson to brew Heineken products in Canada for export markets, the fact that it would open up more global export opportunities for Molson, the opportunity to piggyback Heineken's stronger distribution network in the U.S.," and bolster flagging operations in Brazil, Van Aelst was quoted as saying in The (Toronto) Globe and Mail last month.

"Having said that, an agreement with Heineken would have to be more creative as Heineken is considerably larger and, therefore, Eric's desire to maintain control of a 'Molson brewery' would be tougher to accommodate."


11 August, 2004