NEW YORK (CNN/Money) -
Adolph Coors Co. and Canada's Molson announced a merger Thursday that would create a brewer with $6 billion in sales, but a possible squabble within the Molson family clouded the potential deal.
The companies did not give a value for their stock swap, which they termed a merger of equals. But they said it would create the world's No. 5 brewer.
Coors, currently No. 3 in the United States, and Molson, the biggest brewer in Canada, said they expect to achieve $175 million in annual cost savings from the deal by 2007.
The combined company's top brands would include Coors Light, Molson Canadian, the biggest selling Canadian brand, and Carling, the best selling brand in Britain.
Molson Chairman Eric Molson will serve as chairman of the combined company while Coors CEO W. Leo Kiely III will be the CEO of Molson Coors Brewing Co. The company would have dual headquarters in Montreal and Colorado.
But the Wall Street Journal reported that Molson's cousin Ian Molson, a former deputy chairman of the company, is expected to make an offer of up to $4 billion to acquire Molson in a bid to block the merger.
And industry analysts in a conference call Thursday morning asked about possible competing bids or Ian Molson otherwise moving to block the deal.
Molson executives on the call declined to speculate on a possible competing bid from Ian Molson. They insisted the way the deal is structured gets around an agreement between Ian and Eric Molson that prevents them from selling shares without the approval of the other.
|The proposed Molson Coors merger would combine some of the world's best-selling beer brands.
But Eric Molson and his allies in the family control only 55 percent of the voting shares of Molson stock, and approval of two-thirds of those shares are needed.
While Eric Molson said he believed the deal had support of other Molson family members who control those voting shares, he could not say for sure there was the necessary support for the Coors deal at this time.
A $75 million break-up fee if the deal is not completed would not be paid if it fails to get shareholder approval.
The Journal said that Ian Molson's bid would represent about a 30 percent premium for Molson shareholders, rather than the no-premium exchange rate under the planned merger with Coors.
It also would play on nationalistic feelings of many individual Canadian shareholders who don't want to lose Canadian control of the company. The company's most popular advertising campaign a few years ago was a nationalist rant that listed differences between the United States and Canada and ended with the actor shouting, "I am Canadian!"
In addition to the Molson-family controlled voting stock, approval of the so-called "non-voting" shareholders is also needed for the deal to be completed.
The Journal reported that Ian Molson is credited with being the main architect of the company's recent turnaround. He resigned from the board in May due to differences with his cousin. The report said Ian had close ties to many of the company's largest shareholders, which was threatening to Eric.
The Coors family also has maintained tight control over the Golden, Colo.-based company, with family members controlling about one-third of voting stock.
Coors has about 11 percent of U.S. beer sales, and is the No. 2 brewer in Britain. Molson has 43 percent of the market in Canada, and it is also the No. 3 brewer in Brazil.