Molson Coors Raises Cash in Equity Offering to Pay for Acquisition

If you ever wonder what companies have to do to raise cash to pay for a large acquisition, sometimes they sell stock and sometimes they sell debt. Other times they use creative financing. In the case of the Molson Coors Brewing Co. (NYSE: TAP) acquisition of MillerCoors, the answer appears to be to sell equity.

Molson Coors has announced an underwritten public offering of $2.35 billion of shares of its Class B common stock. The beer and brewing giant also signaled that the company intends to grant its underwriters a 30-day overallotment option, or a greenshoe option, to purchase up to an additional $235 million of shares of Class B common stock.

As noted above, Molson Coors plans to use the net proceeds from the equity offering to fund the previously announced acquisition from Anheuser-Busch InBev S.A./N.V. (NYSE: BUD) of SABMiller’s interest in MillerCoors — and all other assets primarily related to the Miller brand portfolio outside of the United States and Puerto Rico. This of course includes the payment of all related fees and expenses of the acquisition.

Investors may want to take note that this proposed equity offering is not conditioned on the closing of the Miller Coors acquisition. They even specified alternative uses of capital:

In the event that the Acquisition is not consummated, Molson Coors intends to use the net proceeds of this offering for general corporate purposes, which may include share repurchases, acquisitions or debt repayment.

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UBS, Bank of America Merrill Lynch and Citigroup were listed as the joint book-running managers for the equity offering. BMO Capital Markets, MUFG, RBC Capital Markets and Wells Fargo Securities are also acting as joint book-running managers for the offering.

Miller Coors shares went down by about 1.1% to $86.75 in the after-hours after this offering was announced. With a 1.8% or so dividend yield and a market cap of $16.2 billion, maybe the equity investors are worried about a dilutive impact against their ability to expect higher dividends ahead. Maybe.