MOLSON COORS BREWING CO. $95 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 214.4 million; Market cap: $20.4 billion; Price-tosales ratio: 5.6; Dividend yield: 1.7%; TSINetwork Rating: Average; www.molsoncoors.com) is buying the 58% stake of MillerCoors it doesn’t already own. This business took its current form in 2008 when Molson and SABMiller combined their U.S. brewing operations.
SABMiller is now merging with rival Anheuser- Busch InBev to create the world’s largest brewer. To satisfy competition regulators, SABMiller will sell its stake in MillerCoors to Molson for $12.0 billion.
Paying for this business will add to Molson’s longterm debt of $2.9 billion, which is equal to 14% of its market cap. However, the deal will add $4.7 billion to its annual revenue. It totaled $3.6 billion in 2015.
The company also plans to combine its purchasing and distribution operations with MillerCoors. That should save it $200 million a year by the end of the fourth year. Moreover, the purchase will give Molson $250 million in annual tax savings for the next 15 years. To put these figures in context, the company earned $700.4 million, or $3.76 a share, in 2015.
The stock now trades at a high 27.8 times Molson’s projected 2016 earnings of $3.42 a share. That estimate excludes the MillerCoors purchase. The $1.64 dividend yields 1.7%.
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