Molson, Coors Merger Complete, Job Cuts Announced
Molson Inc. and Adolph Coors Company announced that they have completed the transaction announced on July 22, 2004, to combine Molson and Coors in a merger of equals. Molson Coors Brewing Company is a new global brewing company with the operating scale and balance sheet strength to be a major player in the continuing consolidation of the brewing industry.
Molson and Coors shareholders approved the combination at their special shareholder meetings held on January 28 and February 1, 2005, respectively, and the QuDebec Superior Court approved the transaction as required by Canadian law on February 2, 2005.
W. Leo Kiely III, chief executive officer of Molson Coors Brewing Company, said, "By combining Molson and Coors, we have created a company with the market and financial strength necessary to drive organic growth and compete more effectively in today's increasingly challenging global market, while preserving the rich heritages of two of the world's most prominent brewing companies. We look forward to drawing on this brewing heritage and the combined strengths of a world-class management team to deliver greater value to our customers, partners, employees and shareholders."
"This transaction marks a new and important chapter in the history of both companies," said Eric H. Molson, chairman of Molson Coors Brewing Company. "It leverages successful business relationships and builds on the strategic and cultural fit between our two companies. With an impressive track record in brewing excellence, the new Molson Coors Brewing Company will be a dynamic and competitive organization that will create long-term value for our shareholders and the communities in which we operate."
The newly created Molson Coors Brewing Co. wasted little time in announcing cost-cutting measures, saying that 410 jobs will be eliminated when it closes its brewery in Tennessee in early 2007.
The new entity is expected to achieve US $175 million in cost synergies following the C $6 billion cash-and-share merger of Montreal-based Molson Inc. and Adolph Coors Co. of Colorado.
"It is consistent with the company's plans to structure its U.S. and Canadian brewery network to optimize brewing and packaging operations, leverage the facilities' proximity to customers and reduce related distribution and overhead costs," CEO Leo Kiely said in a release.
Analyst Mike Van Aelst of CIBC World Markets said it is unlikely Molson Coors would mothball any breweries in Canada because Molson already closed several in recent years. It is building a new brewery in Moncton, N.B.
The Memphis closing will begin in the second half of this year and will save US $32 million to $35 million annually when completed in early 2007, the company said.
Included among the planned merger synergies is $60 million for "brewery network optimization."
The company also said it will invest $70 million to $90 million in capital expenditures in its North American brewery network, along with restructuring and other costs.
Kiely thanked Memphis but said the beer industry is "incredibly competitive and, unfortunately, tough decisions like this one must be made to compete and grow."
Molson Coors has 18 breweries and about 15,000 employees in North America, Brazil and Britain. Van Aelst said Molson Coors is likely to shut down some of its production at its main plant in Colorado, although it could not move its core brands because their brand image is associated with the Rocky Mountains.
"I don't have an issue with them achieving these synergies; the question is more, will they all fall to the bottom line?" Van Aelst said.
The Memphis brewery, which Coors bought in 1990 from Stroh Brewery Co., has a capacity of three million barrels a year.