TORONTO, Sept 15 (Reuters) - Shares of Molson Coors Brewing Co surged on Monday on speculation that the company may emerge as a winner if the world’s largest brewer, Anheuser-Busch InBev, moves to acquire rival SABMiller .
If Anheuser-Busch does successfully move on SABMiller, analysts say, SABMiller would be forced to sell its 58 percent stake in MillerCoors to win regulatory approvals.
MillerCoors is a joint-venture formed in 2008 by Molson Coors and SABMiller to help them compete against AB InBev in the United States. The venture brews and markets beers such as Coors Light, Molson Canadian and Miller Lite on behalf of the two companies in the United States.
Analysts speculate that Molson Coors would be very eager to consolidate its stake in the venture and that any such deal would have the potential to boost Molson Coors earnings.
“Obviously, there is a long way to go before this situation gets to the point where Molson Coors will benefit,” said Gordon Haskett Research analyst Don Bilson in a note to clients. “But this party finally looks like it is getting started and we like the prospects for Molson Coors.”
Shares of Molson Coors were up 7.3 percent at $77.06 on the New York Stock Exchange in afternoon trading on Monday.
The latest round of speculation about a move by AB InBev on SABMiller, the world’s No. 2 brewer, was sparked by news that Dutch brewer Heineken had rebuffed a takeover bid from SABMiller.
Several analysts saw SABMiller’s move on Heineken as either an attempt to head off a bid from AB InBev or a possible means for SABMiller to force its larger rival into action. Speculation about a AB InBev acquisition of SABMiller has been rife for many years.
ISI Group analyst Robert Ottenstein, in a detailed analysis of a potential AB InBev and SABMiller deal a few months ago, said that Molson Coors would emerge as the “clear winner” in the event of a transaction.
He said that a transaction at 10 times earnings before interest, taxes, depreciation and amortization would be highly accretive for Molson Coors, even if it has to issue equity to fund a portion of the purchase price for the MillerCoors joint venture.
While Credit Suisse analyst Sanjeet Aujla speculated that Heineken’s rejection could prompt SABMiller to turn its sights to Molson Coors, others said that such a deal would not be easy.
“We understand that the terms of the MillerCoors agreement of June 2008 prevent SABMiller from even approaching Molson Coors to discuss a combination until June 2018,” said Ottenstein in a note to clients on Monday. (Reporting by Euan Rocha; Editing by Steve Orlofsky)