9th Oct 2007 12:00
SABMiller PLC09 October 2007 SABMILLER AND MOLSON COORS TO COMBINE U.S. OPERATIONS IN JOINT VENTURE •Combination of complementary assets will create a stronger, more competitive U.S. brewer with an enhanced brand portfolio •Greater scale and resources will allow additional investment in brands, product innovation and sales execution •Consumers and retailers will benefit from greater choice and access to brands •Distributors will benefit from a superior core brand portfolio, simplified systems, lower operating costs and improved chain account programs •$500 million of annual cost synergies will enhance financial performance •SABMiller and Molson Coors with 50%/50% voting interest and 58%/42% economic interest 9 October 2007 (London and Denver) -- SABMiller plc (SAB.L) and Molson CoorsBrewing Company (NYSE: TAP; TSX) today announced that they have signed a letterof intent to combine the U.S. and Puerto Rico operations of their respectivesubsidiaries, Miller and Coors, in a joint venture to create a stronger,brand-led U.S. brewer with the scale, resources and distribution platform tocompete more effectively in the increasingly competitive U.S. marketplace. The new company, which will be called MillerCoors, will have annual pro formacombined beer sales of 69 million U.S. barrels (81 million hectoliters) and netrevenues of approximately $6.6 billion. Pro forma combined EBITDA will beapproximately $842 million(1). SABMiller and Molson Coors expect the transactionto generate approximately $500 million in annual cost synergies to be deliveredin full by the third full financial year of combined operations. The transactionis expected to be earnings accretive to both companies in the second fullfinancial year of combined operations. Closing of the transaction is subject toreaching final agreement, obtaining clearance from U.S. competition authorities,certain other regulatory clearances and third-party consents, as required. SABMiller and Molson Coors will each have a 50% voting interest in the jointventure and have five representatives each on its Board of Directors. Based onthe economic value of the contributed assets, SABMiller will have a 58% economicinterest in the joint venture and Molson Coors will have a 42% economicinterest. Pete Coors, Vice Chairman of Molson Coors, will serve as Chairman ofMillerCoors. Graham Mackay, SABMiller CEO, will serve as Vice Chairman ofMillerCoors. Leo Kiely, current CEO of Molson Coors, will be the CEO of thejoint venture, and Tom Long, current CEO of Miller, will be appointed Presidentand Chief Commercial Officer. Commenting on the transaction, Graham Mackay, Chief Executive of SABMiller,said, "We are excited by the enhanced prospects for growth and the considerablebenefits to all stakeholders that this joint venture offers. Given the highlycomplementary nature of our U.S. assets, operations and geographic footprint,this is a logical and compelling combination that we expect will createsignificant value for shareholders while benefiting distributors, consumers,retailers and the market overall. We look forward to working with Molson Coorsto jointly develop the combined business." Pete Coors, Vice Chairman of Molson Coors, said, "This transaction is driven bythe profound changes in the U.S. alcohol beverage industry that are confrontingboth of our companies with new challenges. Consumers are broadening their tastesand are increasingly looking for greater choice and differentiation; wine andspirits companies are encroaching on traditional beer occasions, and global beerimporters and craft brewers are both taking a larger share of volume and profitgrowth. Creating a stronger U.S. brewer will help us meet these challenges,compete more effectively and provide U.S. consumers with more choice, greaterproduct availability and increased innovation. The Molson and Coors families arefirmly in support of this strategic transaction." Leo Kiely, Chief Executive of Molson Coors, said, "As a result of thiscombination, Miller and Coors will be able to provide more focused support forour flagship brands, while taking full advantage of consumers' demand forimported and craft brands and innovative products. Both companies have a lot ofmomentum in their businesses today, and I am confident that this will accelerateas we adopt the best practices of both organizations. I am delighted to have theopportunity to be part of such a dynamic team that will mesh truly great brewingtraditions, management teams, employees and cultures, while retaining bothcompanies' commitment to social responsibility and the communities in which weoperate." Tom Long, Chief Executive and President of Miller, said, "Many importantstakeholders will see clear benefits from the new company. Distributors willbenefit from a robust brand portfolio, strengthened marketing investments,reduced complexity and costs, and enhanced relationships and coverage with largechain retailers. Retail customers will have an even stronger partner to driveconsumer demand through product and packaging innovation, space optimization andenhanced retail execution. Our employees will have the opportunity to work for astronger and more competitive player in the U.S. beer industry. And thecommunities where we do business will see a faster growing enterprise providingimportant economic benefits." Transaction Rationale - Creation of a Stronger, Brand Led U.S. Brewer SABMiller and Molson Coors expect that the enhanced brand portfolio, scale andcombined management strength of the joint venture will allow it to bettercompete in the highly competitive and changing U.S marketplace and thus improvethe standalone operational and financial performance of both Miller and Coorsthrough: • Building a Stronger Brand Portfolio and Giving Consumers More Choice The combined company will have a more complete and differentiated brand portfolio and the ability to invest more effectively in marketing its brands to consumers. MillerCoors will build on the unique attributes of both Miller Lite and Coors Light to ensure compelling differentiation. The new company will also be better positioned to meet the increasingly diverse demands of U.S. beverage alcohol consumers through imports like Peroni, Molson and Pilsner Urquell; craft varieties including Leinenkugel's, Blue Moon and Henry Weinhard's; and specialty beers like Miller Chill, Killian's and Sparks. MillerCoors will have more flexibility and resources for brand-building initiatives and increased levels of innovation in taste, product attributes and packaging. • Capturing Synergies and Improving Productivity The combination of the businesses is expected to result in identified annual cost synergies of $500 million, to come from optimization of production over the existing brewery network, reduced shipping distances, economies of scale in brewery operations and the elimination of duplication in corporate and marketing services. The expected timing of the synergies is $50 million in the first full financial year of combined operations; an additional annualized $350 million in Year Two; and another annualized $100 million in Year Three - for an aggregate annual total of $500 million. One-time cash outlays required to achieve these synergies are expected to amount to a net $450 million consisting of costs of approximately $230 million and net capital expenditure of approximately $220 million. • Creating a More Effective Competitor This deal will create a stronger U.S. brewer with the scale, operational efficiency and distribution platform to compete more effectively in the U.S. against large scale brewers, both domestic and global, craft brewers, and wine and spirits producers. The joint venture will be positioned to respond more effectively to the needs of a consolidating distributor and retailer market, as well as to the cost pressures in the industry. • Improving the Route to Market and Benefiting Distributors and Retailers By leveraging complementary geographic strengths and distribution systems, the joint venture will be able to better align production with consumer location. Today, approximately 60% of the volume of the combined operation is estimated to go through a shared distribution system, and the companies have found that this has enhanced distributor effectiveness. MillerCoors will also have greater capacity to invest to meet the diverse product, packaging and service requirements of increasingly demanding consumers, distributors and the retail trade. In addition, streamlined processes and systems and more effective marketing programs will enhance distributors' ability to compete and benefit retailers. o Optimizing Organizational Strength The joint venture will focus on creating a high-performing, results and value-based culture which will take the best elements of both companies to create a competitive organization, capable of the highest standards of operational and service excellence in the industry. The joint venture will continue to comply with all provisions of existing labor agreements. Approval Process and Timetable The transaction is subject to reaching final agreement, which is expected by theend of 2007. Closing of the transaction is also subject to obtaining clearancesfrom the U.S. competition authorities and certain other regulatory clearancesand third-party consents as required. The transaction will require the approvalof a majority of Molson Coors' Class A common and exchangeable shareholders,which is expected to be given at the time of signing the definitive agreementsfrom the Molson and Coors families, who own a majority of such shares. Thetransaction does not otherwise require approval by the shareholders of eitherparty. The Miller business and the Coors business will be conducted separatelyand in the ordinary course between signing and completion. Financial and Other Information • Financial information Miller(1) Coors(2) Pro forma For the year For the four fiscal quarters combined ended ended 31 March 2007 1 April 2007 Net revenue 3.9 2.7 6.6 $bn EBITDA $m 484 358 842 EBIT $m 342(3) 241 583 (1) As reported under IFRS excluding the international segment (2) As reported under US GAAP, excluding special items (3) Represents the North American segmental EBITA per the annual financialstatements less amortization of $9 million and EBIT of $24 million attributableto the international segment. The partners currently plan to retain leverage outside the joint venture,supported by strong cash flow generation. Therefore, the combined business willhave a strong balance sheet. Cash distributions to the partners and cash flowinjections from the partners will be undertaken pro rata to the partners'economic interests. • Financial effects on SABMiller and Molson Coors On a pro forma basis, the transaction is expected to be accretive to earnings per share, after synergies and synergy capture costs, for both partners in the joint venture's second full financial year of combined operation. The transaction has been undertaken as a merger of equals and is expected to deliver substantial synergies, and therefore the SABMiller and Molson Coors Boards expect that the transaction will generate positive value and economic profit for each partner respectively in the second full financial year of combination. • Financial reporting The partners will coordinate their financial reporting to ensure that both companies' shareholders receive the same information in relation to the joint venture at the same time. Management and Governance of the Joint Venture In addition to the appointments of the CEO and the President and CCO ofMillerCoors announced above, as part of the integration planning process, theparties will draw the senior management team of the joint venture whereverpossible from existing members of the executive teams of Miller and Coors. Theparties have also agreed to a process for subsequent CEO selection which willemphasize, to the extent possible, succession planning from within the jointventure. Structure of the Transaction The joint venture will be effected through the contribution by both parties oftheir U.S. and Puerto Rico operations into a limited liability company to beformed under Delaware law. Each of the parties has agreed that all its U.S.business will be conducted exclusively through the joint venture. The international operations of Miller and Coors will not be contributed to thejoint venture and will be managed separately by the respective companies. Theparties will agree to appropriate brand management arrangements to protect thecross border integrity of brands in different territories. The parties willenter into appropriate contract brewing and service arrangements with the jointventure for the production of these brands for export to markets outside theU.S. and Puerto Rico(2). SABMiller and Molson Coors will enter into a mutual standstill agreement whichwill prevent SABMiller and Molson Coors from making an unsolicited offer for theshares of the other party for a period of 10 years following completion of thetransaction. The parties have agreed to appropriate rights of first offer and last refusal inthe event of either party wanting to sell its interest in the joint ventureafter an initial no sale period of 5 years. If definitive agreements are not signed because a third party proposes acompeting transaction, then if either company agrees before 31 December 2008 toimplement a competing transaction, that company will pay to the other a break-upfee of $150 million. Overview of SABMiller SABMiller plc is one of the world's largest brewers with brewing interests ordistribution agreements in over 60 countries across six continents. The group'sbrands include premium international beers such as Miller Genuine Draft, PeroniNastro Azzurro and Pilsner Urquell, as well as an exceptional range of marketleading local brands. Outside the USA, SABMiller plc is also one of the largestbottlers of Coca-Cola products in the world. In the year ended 31 March 2007,the group reported $3,154 million adjusted pre-tax profit and revenue of $18,620million. SABMiller plc is listed on the London and Johannesburg stock exchanges. For more information on SABMiller plc, visit the company's website:www.sabmiller.com. Overview of Molson Coors Molson Coors is one of the world's leading brewers. It brews, markets and sellsa portfolio of premium quality brands such as Coors Light, Molson Canadian,Molson Dry, Carling, Coors, and Keystone Light. It operates in Canada, throughMolson Canada; in the U.S., through Coors Brewing Company; in the UK, Europe andAsia, through Coors Brewers Limited. For more information on Molson CoorsBrewing Company, visit the company's website, www.molsoncoors.com. Overview of Miller Miller produces, markets and sells the Miller portfolio of brands in the U.S.The Miller business to be contributed to the joint venture (the "MillerBusiness") does not include the sales of Miller brands outside the U.S., butdoes include the sale of other SABMiller brands in the U.S. Financial information The Miller Business' net revenue, EBIT and EBITDA for the year ended 31 March2007 under IFRS were $3.9 billion, $342 million and $484 million, respectively. As at 31 March 2007, the Miller Business had gross assets of not more than $6.1billion on an IFRS basis. Overview of Coors Coors produces, markets and sells the Coors portfolio of brands in the U.S. andPuerto Rico, which is managed as an integral part of the U.S. business, and alsoholds 50% interests in the Rocky Mountain Metal Corporation and Rocky MountainBottle Corporation joint ventures. The Coors business to be contributed to thejoint venture (the "Coors Business") will not include the sales of Coors brandsoutside the U.S. and Puerto Rico. The business to be contributed does includethe sale of other Molson Coors brands in the U.S. and Puerto Rico. Financial information The Coors Business' net revenue, EBIT and EBITDA for the four fiscal quartersended 1 April 2007 under US GAAP were $2.7 billion, $241 million and $358million, respectively. At 31 December 2006, the U.S. segment of Molson CoorsBrewing Company reported gross assets of $2.6 billion on a U.S. GAAP basis. Financial Community Meeting and Webcast The companies will host a financial community meeting and webcast today at 10:00a.m. EDT to discuss the joint venture. The meeting will be located at The NewYork Palace Hotel, 455 Madison Avenue, New York, New York. The live videowebcast, a slide presentation and the archived video webcast will be availableat www.sabmiller.com and www.molsoncoors.com. Press are invited to attend, view the video webcast or download the meetingfootage and b-roll using the following analog downlink information: Time: 9:50 a.m. (ET) Satellite: Galaxy 11 Transponder: KU 20 Downlink Frequency: 12100.0 Vertical This announcement is for information only and does not constitute an offer or aninvitation to acquire or dispose of any securities or investment advice or aninducement to enter into investment activity. This announcement does notconstitute an offer to sell or issue or the solicitation of an offer to buy oracquire the securities of SABMiller or Molson Coors (the "Companies") in anyjurisdiction. The distribution of this announcement may be restricted by law. Persons intowhose possession this announcement comes are required by the Companies to informthemselves about and to observe any such restrictions. Forward-Looking Statements This press release includes "forward-looking statements" within the meaning ofthe U.S. federal securities laws, and language indicating trends, suchas "anticipated" and "expected". It also includes financial information, ofwhich, as of the date of this press release, the Companies' independent auditorshave not completed their review. Although the Companies believe that theassumptions upon which their respective financial information andtheir respective forward-looking statements are based are reasonable, they cangive no assurance that these assumptions will prove to be correct. Importantfactors that could cause actual results to differ materially from the Companies'projections and expectations are disclosed in Molson Coors' filings with theSecurities and Exchange Commission and in SABMiller's annual report and accountsfor the year ended 31 March 2007 and in other documents which are available onSABMiller's website at www.sabmiller.com. These factors include, among others,changes in consumer preferences and product trends; price discounting by majorcompetitors; failure to realize anticipated results from synergy initiatives; failure to obtain regulatory consents or other third party approvals; andincreases in costs generally. All forward-looking statements in this pressrelease are expressly qualified by such cautionary statements and by referenceto the underlying assumptions. Neither SABMiller nor Molson Coors undertakes toupdate forward-looking statements relating to their respective businesses,whether as a result of new information, future events or otherwise. NeitherSABMiller nor Molson Coors accepts any responsibility for any financialinformation contained in this press release relating to the business oroperations or results or financial condition of the other or their respectivegroups. # # # Contacts For further information, please contact: SABMiller / Miller Tel: +44 20 7659 0100/ 414 931 2000 Nigel Fairbrass Media Relations, SABMiller Mob: +44 7799 894265Pete Marino Media Relations, Miller Mob: 312/339-8833Gary Leibowitz Investor Relations, SABMiller Mob: +44 7717 428540 Molson Coors / Coors Kabira Hatland Media Relations, Molson Coors 303/277-2555Paul de la Plante Media Relations, Molson Coors 303/277-2555Dave Dunnewald Investor Relations, Molson Coors 303/279-6565 Sard Verbinnen & Co Drew Brown Media Relations 212/687-8080Jim Barron Media Relations 212/687-8080Carrie Bloom Media Relations Mob: 516/816-5662 -------------------------- (1) Figures are based on Miller's net revenue and earnings before interest,taxes, depreciation and amortization (EBITDA) in the U.S. and Puerto Rico forthe year ended 31 March 2007, which under IFRS were $3.9 billion and $484million respectively. Net revenue and EBITDA excluding special items for MolsonCoors' U.S. segment for the four fiscal quarters ended 1 April 2007 under USGAAP were $2.7 billion and $358 million respectively. (2) Estimated net revenue, EBITDA and EBIT on a reported basis for Miller'sinternational operations outside the U.S. and Puerto Rico for the year ended 31March 2007 were $91.2 million, $26.4 million and $24.4 million respectively.Coors' net revenue and EBITDA outside the U.S. and Puerto Rico for the fourfiscal quarters ended 1 April 2007 were not material. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SAB.L