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Get ready for a big fight over beer.
Molson Coors (TAP, news, msgs) and SABMiller (SBMRY, news, msgs) said they will combine their North American operations in a bid to challenge the dominance of Anheuser-Busch (BUD, news, msgs).
Wall Street loved the idea -- for Molson Coors. Its shares shot up 10.5% to $56.15 on the day, the biggest gain among stocks in the Standard & Poor's 500 Index. SABMiller was little changed at $29.80.
The joint venture, to be called MillerCoors, would have annual revenue of about $6.6 billion and yield about $500 million in annual cost savings, The Wall Street Journal said.
The combination would bring together two big players in the U.S. beer market: Miller Brewing, the second-largest U.S. brewer by sales with about 20% market share, and Coors Brewing, the No. 3 player with about 11% market share.
Anheuser-Busch controls nearly half the U.S. beer market. Its shares were down 0.9% at $51.57.
Changing tastes
The move comes as the beer giants wrestle with slower growth amid shifting consumer tastes. The mass-market brewers have been losing market share to wine and spirits companies, as well as to small-batch "craft" brewers.- Talk back: Are microbrews worth the bucks?
SABMiller will have a 58% interest in the financial results in the venture. Molson Coors will have a 42% interest.
Miller's top-selling U.S. beer is Miller Lite, while tops at Coors is Coors Light.
Analysts have long speculated that Miller and Coors would need to combine their businesses as the U.S. beer industry matures. Their combination might even force pressure on Anheuser-Busch to seek a merger partner, The Journal said.
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Losing ground globally
Although it dominates the U.S. market, Anheuser, once the world's largest brewer, has fallen to the No. 3 spot.Meanwhile, other companies -- including SABMiller, Miller Brewing's parent -- have expanded internationally through acquisitions.
A wave of mergers among the spirits companies over the last decade has raised the pressure on the beer giants, as liquor companies began to churn out sexy new products and sweet cocktails, luring lure younger drinkers away from beer.
Pre-mixed bottled drinks such as Smirnoff Ice have stolen share from beer over the last decade, with sales of such products currently topping 300 million nine-liter cases -- triple the level of 1997, according to Merrill Lynch.
A final agreement is expected to be signed by the end of 2007 with the deal closing in mid-2008, according to The Associated Press.
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