E-Malt.com News article: 3295

The proposed merger between US brewer Adolph Coors and Canadian brewer Molson is getting weird. According to the New York Times, the proxy statement filed ahead of the Molson vote on the merger allows managers, employees and directors to vote with their stock options. This unusual move raised eyebrows in the US investment world: according to the Times “There is already speculation that the company hopes the option-related votes could overcome expected resistance to the merger from owners of Molson’s non-voting shares.”

The proposed deal, announced in July, has already been the subject of plenty of rumour and speculation, including the suspicion that global giant, SABMiller may make a rival bid for Canada’s biggest brewer, Moneyweb commented on September 20. The SABMiller bid seems unlikely, however, as according to the Times, the proxy statement “confirmed Coors’ position that if any competitor derailed the merger with a successful bid for Molson, it would end a lucrative joint venture that allowed Molson to make and sell Coors Light in its home market.”

According to earlier reports, Coors chief financial officer, Timothy Wolf told attendees at an investor conference in Washington, “If a financial buyer or competitor were to acquire Molson, we would exercise our rights, guaranteed in our contract, and take full control of our brand in Canada.”

Wolf said the contract allows Coors to take back the brand without any compensation to Molson, and in addition, Molson would have to produce Coors Light for the next 10 years. The result would be an immediate doubling of Coors’ annual Canadian profit stream to $100-m, minus the “relatively modest cost” of additional sales representatives and administration.

Chief executive of Molson, Dan O'Neill has previously said that 20% of Molson's roughly $3,2-bn in market value can be attributed to the joint venture with Coors. The loss of the contract would seriously damage Molson’s value.

The Coors/Molson deal would be a marriage between two family businesses grown up. But like many family businesses, Molson is also home to a family feud.

Molson chairman, Eric Molson, who holds a large chunk of the company, supports the Coors deal, and would become chairman of the new company if it goes through. Former deputy-chairman Ian Molson, cousin to Eric, is not in favour of the deal and is trying to mount a counter-offer.

The proxy statement said that Molson's special committee of independent shareholders had received indications from Ian Molson that he was working with other investors to make a cash bid for the company. The committee, however, said that no formal offer had been made.

But that may not be enough to allay worries about the merger. O'Neill has said that the merger may not have enough support among non-voting shareholders for approval. The deal needs the approval of a two-thirds majority of Molson's voting and non-voting shareholders.

Eric Molson holds more than 50% of Molson’s voting shares, while Ian Molson holds about 10% of these shares.

As of the end of June, Molson had 127,6-m shares outstanding, including voting and nonvoting shares. The company reported that just over six million options were outstanding. Thus, by allowing those with unexercised options to vote, the Coors merger could be passed despite resistance.



22 September, 2004