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Email UpdatesIf you follow beverage stocks or follow alcohol and beer stocks very much, you certainly saw the huge gains today seen in Canadian ADR’s of Molson Coors (NYSE:TAP). Shares rose some 10% on four-times normal volume after the announcement that SABMiller plc and Molson Coors will combine U.S. brewing operations into a joint venture called MillerCoors. The joint venture will be 58% owned by SABMiller and 42% owned by Molson Coors with each having an equal voting interest in an all out effort to cut costs to better compete against the dominance of Anheuser-Busch (NYSE:BUD) and the solid Budweiser brands.
This joint venture will result in a combined savings of $500 million annually which will be from reduced shipping distances, economies of scale, production and capacity utilization, and operational and advertising overlaps. The companies are projecting $6.6 Billion in combined U.S. sales. Anheuser-Busch shares are down 1% on the day as its total sales in 2006 for domestic and international (plus equity partner sales) were $15.717 Billion in net sales.
Interestingly enough, Altria Group, Inc. (NYSE:MO) may be the hidden winner in this venture because it owns approximately 28.6% of SABMiller plc. Altria is also the one that will hold the SABMiller interest after the previously announced pending spin-off of Philip Morris International occurs in 2008 (assuming it does).
