SABMiller has announced that it will attempt to hold talks with the Canadian brewer if shareholders turn down its proposal for a $3.5 billon merger with American company Adolph Coors in next week's vote.
Analysts say the vote, set for 19 January, is too close to call. A two-thirds majority is required. The company faces opposition from some shareholders who believe the proposed deal undervalues Molson.
Dissident family member Ian Molson, who is a former deputy chairman of the company, called the deal "a bad transaction". He holds 11.5 per cent of Molson class B shares and will vote against the deal.
David Vanderwood, of Toronto-based Burgundy Asset Management is another minority shareholder opposed to the deal. He said that Molson is almost four times as profitable as Coors in terms of per unit of beer produced.
Yet, company chairman Eric Molson insists the company will be not be bought out. Yesterday evening he appeared to block any deal with the much larger SABMiller. "This company is not for sale. The merger of equals with Coors is the only option on the table on 19 January," he said.
He argues that the merged company with Coors would be big enough to make savings and participate in the worldwide consolidation of the brewing industry. The Molson management are so keen to get the result that shareholders will receive a special dividend of C$3.26 if the transaction is backed.
Reuters has reported that Beutel Goodman & Company who control about 5.5m Molson class A shares will favour the deal. The Ontario Teachers' Pension Plan, with $1.6m shares, also said that it will. "Molson and Coors together will create a stronger company." it said. However, it voiced disappointed that the Molson shareholders had not "been given the opportunity to directly consider any other choice to create value."
But, even if the deal is not voted through, the path will not be clear for SABMiller. Eric Molson controls over half of Molson's voting shares and therefore has an effective veto over any transaction. SABMiller would not be able to make an offer unless it was a friendly one and Molson seems adamant that the company will not be sold.
A takeover of Molson would dramatically boost SABMiller's presence in North America. Mike Gibbs, an analyst with Goldman Sachs, confirmed that such a transaction could have strategic merit and be value enhancing to SABMiller.