I know, you’re as tired of reading about this merger as I am of writing about it, but the hits just keep on coming. The latest: The WSJ, once again, is the first to report that Ian Molson is actively in talks with Heineken regarding funding for a possible premium bid for Molson. We suspect that Ian, who lives in London, is leaking information to the Journal when he needs to get the word out to investors that he is still in the game. However, the Journal notes that while Ian and Heineken are talking, they “remain far apart on an agreement to present a competing bid.” The Journal also says that SABMiller has been in contact with Ian.
While Ian is the belle of the ball for the moment, every analyst we speak to says his chances are slim. There are four delicious reasons why:
1. Coors and Molson have a breakup fee of $75 million.
2. Coors has broadly hinted that they would end their joint brewing venture with Molson if they pulled out of the deal and married another brewer. That would hurt Molson’s bottom line in a big way.
3. Both companies are promising that the first $175 million in synergies will go to the bottom line and thus to investors, and that has turned a few investor’s into believers.
4. And finally, Eric Molson controls over 50% of the family voting stock, and he wants the Coors deal to go through. Ian should start thinking of a contingency plan, like retiring to the tranquil beauties of the family farm.
Meanwhile, while Coors chief strategy officer Rob Klugman was straight-talking to a standing room only crowd of distribs and analysts in Richmond at BBD’s Beer Summit on Monday, Leo Kiely, Dan O’Neill, and Tim Wolf were traveling to Montreal to speak at a lunch meeting with investors. Leo pointed out that scale is everything to today’s brewers: “You’ve got to have the critical mass to play if you’re going to go forward in the beer business. That’s what this merger of equals does for us.”
And then he dropped the bombshell: that Coors would consider canceling their joint venture with Molson if the merger collapsed. He backed it up with the claim that Coors could gain brewing capacity and a sales infrastructure in Canada in a mere 2 1/2 years. You have to give it to Coors..they’ve thought this thing out, and their plan to win over investors is a brilliant one: promise big synergies as profits, sign a big breakup fee as a poison pill for would-be gadflies like Ian, and threaten a costly breakup of the JV if the deal fails. And people still cling to the notion that these guys are simple western cowboys.
BOSTON BEER REBOUNDS. Boston Beer Co. reported Q2 STRs up about 2%, not bad for a tough quarter in the beer business in general. Shipments and orders in-hand suggest that shipments for July and August 2004 will be essentially flat. Pricing was up only 1%.
Boston Beer founder Jim Koch said that Sam Lager and Seasonals were up 5% in the first half of 2004. Sam Adams Light appears to have stabilized although there will continue to be tough comps through the rest of the year. There will be new TV ads for Sam Light soon. We couldn’t access the analyst webcast due to a faulty link on their website, but no worries as we’ll be talking with Jim live tomorrow morning. More later.
INTERBREW MAKES ANOTHER CHINA PLAY. While our western hemisphere brewers are engaged in mature market shenanigans, Interbrew has been quietly making plays in the part of the world where beer consumption is actually growing: China. The latest investment: it will buy a half stake of Malaysian Lion Group’s brewing operations in China. The deal, expected to close in the first quarter of 2004, will position Interbrew as the third largest brewer in China by volume with a 9 share.MTD Sell Day: 20… Sell Days This Month: 22 … Sell Days This Month Last Year: 23
YTD Over/Under Sell Days: +1 This Month Ends on a: Fri. Last Year This Month Ended on a: Thur.
