Molson announces $6B US merger deal with Coors CBC News. Posted: Jul 22, 2004 6:45 AM ET Last Updated: July 23, 2004 Molson Inc. (TSX:MOL.a)and Adolph Coors Co. announced on Thursday they have agreed to a merger that will create a new brewing giant with $6 billion US in sales. The new Molson Coors Brewing Company, created from Canada's largest brewer and the third biggest in the United States, would be the fifth biggest brewer in the world by volume of beer sold With an estimated brewing volume of 60 million hectolitres, the new company would still be dwarfed by the leading brewers, including global number 1 Anheuser-Busch and second-ranked SABMiller. The company will have executive headquarters in Denver, Colorado, and in Montreal. The firm's Canadian operations will be managed from Toronto, while U.S. operations will be managed from Golden, Colorado. The deal ends the independence of two of North America's oldest family controlled beer companies. In an industry that has been rapidly consolidating in recent years, it appears the Coors and Molson families hoped the merger would allow them to retain key roles they would have been shut out of had the companies been sold to much larger brewers. Molson chair Eric Molson becomes chair of the new combined company. Coors chief executive Leo Kiely will be the new company's CEO. Molson CEO Dan O'Neill is expected become the new firm's vice-chair. "This is a great step forward for us," Eric Molson said during a news conference with Coors chairman Peter Coors in New York. "This is a brewing tradition and a national icon that will continue to forge ahead and this step is of great benefit to all our shareholders and for our country. We are taking a Canadian company and building it into another level," he said. The two companies said the merger is expected to produce approximately $175 million US in annual savings by 2007. Half of those annual savings are expected to be realized within 18 months after the merger is completed. The deal is structured as a share swap. Holders of Molson Class B voting shares get 0.126 of a voting share and 0.234 of a non-voting share of Molson Coors, while Molson Class A non-voting shares will convert into 0.360 of a non-voting share of Molson Coors. BACKGROUND: A Brief History of Beer The deal may not come off without a hitch. Former Molson vice-chairman lan Molson is reported to be in the works to offer $4 billion for the brewery his family founded. Molson class A shares gained $1 on Thursday, rising almost 3 per cent to end at $35.70 on the TSX, Shares of Adolph Coors fell $2.33 US on the NYSE, ending at $72.40 US. Earnings down at Molson Molson announced the merger as it reported its quarterly financial results on Thursday. Coors is also reporting earnings on Thursday. Net profits for Molson fell 19.3 per cent to $68.3 million in the three months ended June 30, the first quarter of the company's 2005 fiscal year. Those results excluded special charges for restructuring and gains. Profits last year were $84.6 million. Quarterly revenues were $675 million, up from $661.8 million, the company reported. 2) Why would Molson Canadian want to be bought out by Coors? 3) 3) What are the benefits and potential risks Molson Canadian can experience with starting a joint venture with Coors