After a long wait, Denver-based Molson Coors Brewing Company TAP now has 100% ownership of MillerCoors after its acquisition of London-based SABMiller plc’s 58% share of the company for $12 billion. In addition, Molson Coors has acquired the Miller brand portfolio globally. It now has full rights to all the brands in the MillerCoors portfolio for the U.S. market, including Redd’s and import brands such as Peroni and Pilsner Urquell.
MillerCoors was a joint venture of Molson Coors and SABMiller formed in 2008 that sells both companies' products in the U.S. Molson Coors had 42% stake before the acquisition. SABMiller sold its stake in MillerCoors to satisfy antitrust concerns of U.S. regulators as part of its planned merger with Anheuser-Busch InBev that closed on Monday.
MillerCoors will now operate as the U.S. business of Molson Coors, which includes the U.S. and Puerto Rico. Also, it will retain its name and headquarters in Chicago. MillerCoors is expected to provide 70% of Molson Coors’ total revenue.
Post this acquisition, Molson Coors’ annual revenue is anticipated to grow to $11.2 billion, increasing from $6.8 billion in 2015. Underlying earnings before income taxes, depreciation and amortization are projected to be $2.3 billion, up from $1.3 billion. Volumes will grow to 94 million hectoliters from 58 million.
This acquisition would also enable Molson Coors to improve scale and gain significant synergies, allowing it to cut costs quickly. As the U.S. beer market grows slowly, lower costs will help the company to increase its profits in the coming years.
Per reports, strong margins via cost savings and synergies, solid cash generation and stable top-line growth volume would result in double-digit EPS growth. Also, Molson Coors reportedly plans to announce a cost savings program of $900 million.
Currently, Molson Coors holds a Zacks Rank #2 (Buy).
Investors can also take a look at another beverage company, Constellation Brands Inc. STZ, with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Constellation Brands has posted an average positive earnings surprise of 24.01% in the trailing four quarters. The stock has a long-term earnings growth rate of 17.77%.
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