| Tue 9 Oct 2007, 13:00 | | SAB - SABMiller - SABMiller and Molson Coors to co |
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SAB
SOSAB
SAB - SABMiller - SABMiller and Molson Coors to combine U.S. operations in
joint venture
SABMILLER PLC
JSEALPHA CODE: SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483
SABMILLER AND MOLSON COORS TO COMBINE U.S. OPERATIONS IN JOINT VENTURE
Combination of complementary assets will create a stronger, more competitive
U.S. brewer with an enhanced brand portfolio
Greater scale and resources will allow additional investment in brands,
product innovation and sales execution
Consumers and retailers will benefit from greater choice and access to brands
Distributors will benefit from a superior core brand portfolio, simplified
systems, lower operating costs and improved chain account programs
$500 million of annual cost synergies will enhance financial performance
SABMiller and Molson Coors with 50%/50% voting interest and 58%/42% economic
interest
9 October 2007 (London and Denver) - SABMiller plc (SAB.L) and Molson Coors
Brewing Company (NYSE: TAP; TSX) today announced that they have signed a
letter of intent to combine the U.S. and Puerto Rico operations of their
respective subsidiaries, Miller and Coors, in a joint venture to create a
stronger, brand-led U.S. brewer with the scale, resources and distribution
platform to compete more effectively in the increasingly competitive U.S.
marketplace.
The new company, which will be called MillerCoors, will have annual pro forma
combined beer sales of 69 million U.S. barrels (81 million hectoliters) and
net revenues of approximately $6.6 billion. Pro forma combined EBITDA will be
approximately $842 million. SABMiller and Molson Coors expect the transaction
to generate approximately $500 million in annual cost synergies to be
delivered in full by the third full financial year of combined operations. The
transaction is expected to be earnings accretive to both companies in the
second full financial year of combined operations. Closing of the transaction
is subject to reaching final agreement, obtaining clearance from U.S.
competition authorities, certain other regulatory clearances and third-party
consents, as required.
SABMiller and Molson Coors will each have a 50% voting interest in the joint
venture and have five representatives each on its Board of Directors. Based
on the economic value of the contributed assets, SABMiller will have a 58%
economic interest in the joint venture and Molson Coors will have a 42%
economic interest.
Pete Coors, Vice Chairman of Molson Coors, will serve as Chairman of
MillerCoors. Graham Mackay, SABMiller CEO, will serve as Vice Chairman of
MillerCoors. Leo Kiely, current CEO of Molson Coors, will be the CEO of the
joint venture, and Tom Long, current CEO of Miller, will be appointed
President and Chief Commercial Officer.
Commenting on the transaction, Graham Mackay, Chief Executive of SABMiller,
said, "We are excited by the enhanced prospects for growth and the
considerable benefits to all stakeholders that this joint venture offers.
Given the highly complementary nature of our U.S. assets, operations and
geographic footprint, this is a logical and compelling combination that we
expect will create significant value for shareholders while benefiting
distributors, consumers, retailers and the market overall. We look forward to
working with Molson Coors to jointly develop the combined business."
Pete Coors, Vice Chairman of Molson Coors, said, "This transaction is driven
by the profound changes in the U.S. alcohol beverage industry that are
confronting both of our companies with new challenges. Consumers are
broadening their tastes and are increasingly looking for greater choice and
differentiation; wine and spirits companies are encroaching on traditional
beer occasions, and global beer importers and craft brewers are both taking a
larger share of volume and profit growth. Creating a stronger U.S. brewer will
help us meet these challenges, compete more effectively and provide U.S.
consumers with more choice, greater product availability and increased
innovation. The Molson and Coors families are firmly in support of this
strategic transaction."
Leo Kiely, Chief Executive of Molson Coors, said, "As a result of this
combination, Miller and Coors will be able to provide more focused support for
our flagship brands, while taking full advantage of consumers` demand for
imported and craft brands and innovative products. Both companies have a lot
of momentum in their businesses today, and I am confident that this will
accelerate as we adopt the best practices of both organizations. I am
delighted to have the opportunity to be part of such a dynamic team that will
mesh truly great brewing traditions, management teams, employees and cultures,
while retaining both companies` commitment to social responsibility and the
communities in which we operate."
Tom Long, Chief Executive and President of Miller, said, "Many important
stakeholders will see clear benefits from the new company. Distributors will
benefit from a robust brand portfolio, strengthened marketing investments,
reduced complexity and costs, and enhanced relationships and coverage with
large chain retailers. Retail customers will have an even stronger partner to
drive consumer demand through product and packaging innovation, space
optimization and enhanced retail execution. Our employees will have the
opportunity to work for a stronger and more competitive player in the U.S.
beer industry. And the communities where we do business will see a faster
growing enterprise providing important economic benefits."
Transaction Rationale - Creation of a Stronger, Brand Led U.S. Brewer
SABMiller and Molson Coors expect that the enhanced brand portfolio, scale and
combined management strength of the joint venture will allow it to better
compete in the highly competitive and changing U.S marketplace and thus
improve the standalone operational and financial performance of both Miller
and Coors through:
Building a Stronger Brand Portfolio and Giving Consumers More Choice
The combined company will have a more complete and differentiated brand
portfolio and the ability to invest more effectively in marketing its brands
to consumers. MillerCoors will build on the unique attributes of both Miller
Lite and Coors Light to ensure compelling differentiation. The new company
will also be better positioned to meet the increasingly diverse demands of
U.S. beverage alcohol consumers through imports like Peroni, Molson and
Pilsner Urquell; craft varieties including Leinenkugel`s, Blue Moon and Henry
Weinhard`s; and specialty beers like Miller Chill, Killian`s and Sparks.
MillerCoors will have more flexibility and resources for brand-building
initiatives and increased levels of innovation in taste, product attributes
and packaging.
Capturing Synergies and Improving Productivity
The combination of the businesses is expected to result in identified annual
cost synergies of $500 million, to come from optimization of production over
the existing brewery network, reduced shipping distances, economies of scale
in brewery operations and the elimination of duplication in corporate and
marketing services. The expected timing of the synergies is $50 million in
the first full financial year of combined operations; an additional annualized
$350 million in Year Two; and another annualized $100 million in Year Three -
for an aggregate annual total of $500 million. One-time cash outlays required
to achieve these synergies are expected to amount to a net $450 million
consisting of costs of approximately $230 million and net capital expenditure
of approximately $220 million.
Creating a More Effective Competitor
This deal will create a stronger U.S. brewer with the scale, operational
efficiency and distribution platform to compete more effectively in the U.S.
against large scale brewers, both domestic and global, craft brewers, and wine
and spirits producers. The joint venture will be positioned to respond more
effectively to the needs of a consolidating distributor and retailer market,
as well as to the cost pressures in the industry.
Improving the Route to Market and Benefiting Distributors and Retailers
By leveraging complementary geographic strengths and distribution systems, the
joint venture will be able to better align production with consumer location.
Today, approximately 60% of the volume of the combined operation is estimated
to go through a shared distribution system, and the companies have found that
this has enhanced distributor effectiveness. MillerCoors will also have
greater capacity to invest to meet the diverse product, packaging and service
requirements of increasingly demanding consumers, distributors and the retail
trade. In addition, streamlined processes and systems and more effective
marketing programs will enhance distributors` ability to compete and benefit
retailers.
Optimizing Organizational Strength
The joint venture will focus on creating a high-performing, results and value-
based culture which will take the best elements of both companies to create a
competitive organization, capable of the highest standards of operational and
service excellence in the industry. The joint venture will continue to comply
with all provisions of existing labor agreements.
Approval Process and Timetable
The transaction is subject to reaching final agreement, which is expected by
the end of 2007. Closing of the transaction is also subject to obtaining
clearances from the U.S. competition authorities and certain other regulatory
clearances and third-party consents as required. The transaction will require
the approval of a majority of Molson Coors` Class A common and exchangeable
shareholders, which is expected to be given at the time of signing the
definitive agreements from the Molson and Coors families, who own a majority
of such shares. The transaction does not otherwise require approval by the
shareholders of either party. The Miller business and the Coors business will
be conducted separately and in the ordinary course between signing and
completion.
Financial and Other Information
Financial information
Miller1 Coors2 Pro forma
For the year For the four combined
ended fiscal
31 March 2007 quarters ended
1 April 2007
Net revenue $bn 3.9 2.7 6.6
EBITDA $m 484 358 842
EBIT $m 3423 241 583
1As reported under IFRS excluding the international segment
2As reported under US GAAP, excluding special items
3Represents the North American segmental EBITA per the annual financial
statements less amortization of $9 million and EBIT of $24 million
attributable to the international segment.
The partners currently plan to retain leverage outside the joint venture,
supported by strong cash flow generation. Therefore, the combined business
will have a strong balance sheet. Cash distributions to the partners and cash
flow injections from the partners will be undertaken pro rata to the partners`
economic interests.
Financial effects on SABMiller and Molson Coors
On a pro forma basis, the transaction is expected to be accretive to earnings
per share, after synergies and synergy capture costs, for both partners in the
joint venture`s second full financial year of combined operation. The
transaction has been undertaken as a merger of equals and is expected to
deliver substantial synergies, and therefore the SABMiller and Molson Coors
Boards expect that the transaction will generate positive value and economic
profit for each partner respectively in the second full financial year of
combination.
Financial reporting
The partners will coordinate their financial reporting to ensure that both
companies` shareholders receive the same information in relation to the joint
venture at the same time.
Management and Governance of the Joint Venture
In addition to the appointments of the CEO and the President and CCO of
MillerCoors announced above, as part of the integration planning process, the
parties will draw the senior management team of the joint venture wherever
possible from existing members of the executive teams of Miller and Coors.
The parties have also agreed to a process for subsequent CEO selection which
will emphasize, to the extent possible, succession planning from within the
joint venture.
Structure of the Transaction
The joint venture will be effected through the contribution by both parties of
their U.S. and Puerto Rico operations into a limited liability company to be
formed under Delaware law. Each of the parties has agreed that all its U.S.
business will be conducted exclusively through the joint venture.
The international operations of Miller and Coors will not be contributed to
the joint venture and will be managed separately by the respective companies.
The parties will agree to appropriate brand management arrangements to protect
the cross border integrity of brands in different territories. The parties
will enter into appropriate contract brewing and service arrangements with the
joint venture for the production of these brands for export to markets outside
the U.S. and Puerto Rico.
SABMiller and Molson Coors will enter into a mutual standstill agreement which
will prevent SABMiller and Molson Coors from making an unsolicited offer for
the shares of the other party for a period of 10 years following completion of
the transaction.
The parties have agreed to appropriate rights of first offer and last refusal
in the event of either party wanting to sell its interest in the joint venture
after an initial no sale period of 5 years.
If definitive agreements are not signed because a third party proposes a
competing transaction, then if either company agrees before 31 December 2008
to implement a competing transaction, that company will pay to the other a
break-up fee of $150 million.
Overview of SABMiller
SABMiller plc is one of the world`s largest brewers with brewing interests or
distribution agreements in over 60 countries across six continents. The
group`s brands include premium international beers such as Miller Genuine
Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as an exceptional
range of market leading local brands. Outside the USA, SABMiller plc is also
one of the largest bottlers of Coca-Cola products in the world. In the year
ended 31 March 2007, the group reported $3,154 million adjusted pre-tax profit
and revenue of $18,620 million. SABMiller plc is listed on the London and
Johannesburg stock exchanges.
For more information on SABMiller plc, visit the company`s website:
www.sabmiller.com.
Overview of Molson Coors
Molson Coors is one of the world`s leading brewers. It brews, markets and
sells a portfolio of premium quality brands such as Coors Light, Molson
Canadian, Molson Dry, Carling, Coors, and Keystone Light. It operates in
Canada, through Molson Canada; in the U.S., through Coors Brewing Company; in
the UK, Europe and Asia, through Coors Brewers Limited. For more information
on Molson Coors Brewing Company, visit the company`s website,
www.molsoncoors.com.
Overview of Miller
Miller produces, markets and sells the Miller portfolio of brands in the U.S.
The Miller business to be contributed to the joint venture (the "Miller
Business") does not include the sales of Miller brands outside the U.S., but
does include the sale of other SABMiller brands in the U.S.
Financial information
The Miller Business` net revenue, EBIT and EBITDA for the year ended 31 March
2007 under IFRS were $3.9 billion, $342 million and $484 million,
respectively.
As at 31 March 2007, the Miller Business had gross assets of not more than
$6.1 billion on an IFRS basis.
Overview of Coors
Coors produces, markets and sells the Coors portfolio of brands in the U.S.
and Puerto Rico, which is managed as an integral part of the U.S. business,
and also holds 50% interests in the Rocky Mountain Metal Corporation and Rocky
Mountain Bottle Corporation joint ventures. The Coors business to be
contributed to the joint venture (the "Coors Business") will not include the
sales of Coors brands outside the U.S. and Puerto Rico. The business to be
contributed does include the sale of other Molson Coors brands in the U.S. and
Puerto Rico.
Financial information
The Coors Business` net revenue, EBIT and EBITDA for the four fiscal quarters
ended 1 April 2007 under US GAAP were $2.7 billion, $241 million and $358
million, respectively. At 31 December 2006, the U.S. segment of Molson Coors
Brewing Company reported gross assets of $2.6 billion on a U.S. GAAP basis.
Financial Community Meeting and Webcast
The companies will host a financial community meeting and webcast today at
10:00 a.m. EDT to discuss the joint venture. The meeting will be located at
The New York Palace Hotel, 455 Madison Avenue, New York, New York. The live
video webcast, a slide presentation and the archived video webcast will be
available at www.sabmiller.com and www.molsoncoors.com.
Press are invited to attend, view the video webcast or download the meeting
footage and b-roll using the following analog downlink information:
Time: 9:50 a.m. (ET)
Satellite: Galaxy 11
Transponder: KU 20
Downlink Frequency: 12100.0 Vertical
This announcement is for information only and does not constitute an offer or
an invitation to acquire or dispose of any securities or investment advice or
an inducement to enter into investment activity. This announcement does not
constitute an offer to sell or issue or the solicitation of an offer to buy or
acquire the securities of SABMiller or Molson Coors (the "Companies") in any
jurisdiction.
The distribution of this announcement may be restricted by law. Persons into
whose possession this announcement comes are required by the Companies to
inform themselves about and to observe any such restrictions.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of
the U.S. federal securities laws, and language indicating trends, such as
"anticipated" and "expected". It also includes financial information, of
which, as of the date of this press release, the Companies` independent
auditors have not completed their review. Although the Companies believe that
the assumptions upon which their respective financial information and their
respective forward-looking statements are based are reasonable, they can give
no assurance that these assumptions will prove to be correct. Important
factors that could cause actual results to differ materially from the
Companies` projections and expectations are disclosed in Molson Coors` filings
with the Securities and Exchange Commission and in SABMiller`s annual report
and accounts for the year ended 31 March 2007 and in other documents which are
available on SABMiller`s website at www.sabmiller.com. These factors include,
among others, changes in consumer preferences and product trends; price
discounting by major competitors; failure to realize anticipated results from
synergy initiatives; failure to obtain regulatory consents or other third
party approvals; and increases in costs generally. All forward-looking
statements in this press release are expressly qualified by such cautionary
statements and by reference to the underlying assumptions. Neither SABMiller
nor Molson Coors undertakes to update forward-looking statements relating to
their respective businesses, whether as a result of new information, future
events or otherwise. Neither SABMiller nor Molson Coors accepts any
responsibility for any financial information contained in this press release
relating to the business or operations or results or financial condition of
the other or their respective groups.
Contacts
For further information, please contact:
SABMiller / Miller Tel: +44 20 7659 0100/ 414 931 2000
Nigel Fairbrass Media Relations, SABMiller Mob: +44 7799 894265
Pete Marino Media Relations, Miller Mob: 312/339-8833
Gary Leibowitz Investor Relations, SABMiller Mob:+44 7717 428540
Molson Coors / Coors
Kabira Hatland Media Relations, Molson Coors 303/277-2555
Paul de la Plante Media Relations, Molson Coors 303/277-2555
Dave Dunnewald Investor Relations, Molson Coors 303/279-6565
Sard Verbinnen & Co
Drew Brown Media Relations 212/687-8080
Jim Barron Media Relations 212/687-8080
Carrie Bloom Media Relations Mob: 516/816-5662
Date: 09/10/2007 13:00:01 Produced by the JSE SENS Department.
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