SABMiller keeps door open on bid for Molson
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Mooted rejection of offer from US rival Coors sets up possibility of competing offer
Consumer Industries Editor
CAPE TOWN Global brewer SABMiller kept the possibility open yesterday that it could make an offer for Canadian brewer Molson if US brewer Adolph Coors` bid for the company were to fail.
Molson shareholders are due to vote next week on a bid from Coors the third-biggest brewer in the US behind Anheuser-Busch and SABMiller subsidiary Miller Brewing that could create a brewing group with combined annual sales of about $6bn. SABMiller`s turnover last year was $12,6bn.
But the potential merger, first announced last July, has met with opposition from some major Molson shareholders, who believe it undervalues the company.
Canadian newspaper The Globe and Mail first reported last September that SABMiller was negotiating with former Molson deputy chairman Ian Molson and Toronto-based buyout company Onex about making a bid for the company.
But the Wall Street Journal, which revived speculation yesterday that SABMiller could make a bid, said SABMiller had suspended discussions with Ian Molson and Onex until after the vote.
`A Molson transaction would both have strategic merit and could be value-enhancing to SABMiller,` an SABMiller spokesman said yesterday. `If the Coors deal is voted down by Molson shareholders, we would welcome the opportunity to discuss a potential transaction that may be attractive to both Molson`s shareholders and ours.`
The Molson-Coors merger is in doubt because it would require a two-thirds approval by Molson shareholders, and at least two major shareholders have publicly expressed resistance.
Burgundy Asset Management said in a note to clients late last year that the deal undervalued Molson`s superior profitability, and that the status quo was better for Molson.
Investment firm Jarislowsky Fraser said it would vote against the deal because the financial terms were not attractive, and it would give the Coors and Molson families control of the company despite their minority economic interest.
Ian Molson called it a `bad transaction` and urged shareholders to vote against it, saying they were not being offered a premium for a change of control in the company.
However, there are some obstacles to a bid from a rival group.
There is apparently an agreement allowing Coors to take away Molson`s rights to brew Coors brands in Canada. This would be a blow to the company, as these brands contribute 20% of Molson`s profits, according to a report.
Also, Molson chairman Eric Molson can use his substantial shareholding to block any deal he does not support.
The Coors bid for Molson values Molson at $3,5bn, but it was speculated last year that an SABMiller bid could value Molson at up to $4bn.
In October, Molson reported a second-quarter loss of $117,9m due to a $210m write-down on its Cervejarias Kaiser Brasil beer operation.
SABMiller shares touched an intraday peak of R96 yesterday on the JSE Securities Exchange SA, before settling back to close 6c lower at R94,89.
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