The proposed merger of U.S. operations between SAB Miller and Molson Coors has been approved by federal regulators after an eight-month investigation into possible anti-trust issues. In a statement released today, the U.S. Government said “the proposed joint venture between Miller and Coors is not likely to lessen competition substantially” and concluded that it “is likely to produce substantial and credible savings that will significantly reduce the companies’ costs of producing and distributing beer” instead. According to the Business Journal of Milwaukee, this was the last remaining “hurdle” necessary before the McMerger will take place, which more than likely will now occur in the next few weeks. The planned joint venture, which was revealed back in October of last year, would have Coors and Miller combine their operations in the United States (including Puerto Rico) “in an effort to better compete with dominant domestic brewer Anheuser-Busch Cos. Inc.” The new entity will be known as MillerCoors, which is why I’m calling it the McMerger.
Each parent company will have a 50% voting interest but an economic interest of 58% for SAB Miller and 42% for Molson Coors, based on the assets contributed by each to the joint venture. Pete Coors will become the chairman and Leo Kiely, from Molson Coors will be CEO of MillerCoors. No word yet on how many employees of either company are likely to lose their jobs. Once completed, the “Big Three” will become the “Big Two.” A large brewery is generally defined as one which produces over 2-million barrels of beer annually. Currently, only four breweries meet that definition: Anheuser-Busch, Miller, Coors and Pabst. But as Pabst does not own a brewery and contracts to have all of its beer made elsewhere (primarily at Miller brewing facilities) they are generally no longer considered one of the big boys. The feds have declared the merger no big deal, but I’m not entirely convinced. We’ll see how it plays out, but I can’t help feeling a little uneasy about the prospects.
UPDATE: The Wall Street Journal has now weighed in with their thoughts:
The merger combines Miller Brewing Co. of Milwaukee, the second-largest U.S. brewer with about 18% market share, and Coors Brewing Co. of Golden, Colo., the No. 3 player with about 11% market share.
The companies aim to pare $500 million in costs over the first three years of the venture, in part through lower transportation costs derived from using each other’s breweries to make each other’s beers. As one company in the U.S., Miller and Coors will also have more leverage with retailers, which could help them garner more shelf space at bars and stores. Anheuser, based in St. Louis, controls nearly 50% of the U.S. beer market and boasts the nation’s top-selling beer, Bud Light.