The deal combines the No. 2 and No. 3 U.S. brewers to create a new entity, dubbed MillerCoors, with a 29% U.S. market share (Anheuser-Busch remains No. 1 at 49%) and net revenue of about $6.6 billion. The deal is supposed to deliver $500 million in cost savings within three years.
Already share distributors
The deal also brings two brand families that in many cases already share distributors that compete with A-B's exclusive houses in most cases. And it combines Miller's powerful presence in the Midwest, where Coors is typically soft, with Coors relative strength in the West.
It also creates a powerful, diverse brand portfolio consisting of brands such as Miller Lite, Coors Light, Miller High Life, Blue Moon, Leinenkugel's, Keystone, Killians and Miller Chill. Imports such as Molson, Peroni and Pilsner Urquell fill out the portfolio.
The beer industry has been bracing for further consolidation ever since Anheuser-Busch struck a 20-year pact to import InBev's portfolio of brands, including Stella Artois, Bass and Beck's. And Wall Street analysts speculated this morning that the agreement may spur further deals, such as a full merger between A-B and InBev, and a subsequent merger or joint venture involving Heineken.
Leadership for MillerCoors
Miller and Coors executives will split voting power equally in the new venture, with SABMiller getting a 58% financial stake in the entity. Pete Coors, vice chairman of Molson Coors, will serve as chairman of MillerCoors. Graham Mackay, SABMiller CEO, will serve as vice chairman of MillerCoors. Leo Kiely, current CEO of Molson Coors, will be the CEO of the joint venture, and Tom Long, current CEO of Miller, will be appointed president and chief commercial officer.
Shares of Molson-Coors shot up 11% in early-morning trading in New York, while SABMiller shares rose 3% in London. A-B shares declined slightly this morning.
In a statement, Mr. Coors, referring to "profound changes" facing brewers as consumer tastes have shifted to consuming wine and spirits during "traditional beer occasions," said, "Creating a stronger U.S. brewer will help us meet these challenges, compete more effectively and provide U.S. consumers with more choice, greater product availability and increased innovation. The Molson and Coors families are firmly in support of this strategic transaction."
Added Miller Brewing CEO Tom Long: "Many important stakeholders will see clear benefits from the new company. Distributors will benefit from a robust brand portfolio, strengthened marketing investments, reduced complexity and costs, and enhanced relationships and coverage with large chain retailers."
Coors' major agencies include Interpublic Group of Cos.' DraftFCB; independent Taxi; and Avenue A/ Razorfish. Miller's major shops include Bartle Bogle Hegarty, part owned by Publicis Groupe; WPP Group's Y&R; and Publicis' Saatchi & Saatchi, Starcom and Arc Worldwide.