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Molson Coors Closes StarBev Buy

The US-Canadian brewer Molson Coors Brewing Company (TAP) has finally completed the acquisition of the East European brewer StarBev from a private equity group CVC Capital Partners Limited, following the approval from European authorities last week. The deal was signed in early-April for approximately 2.65 billion euros ($3.54 billion), and the company had received approval from the regulators in Serbia and Ukraine.

As announced earlier, StarBev has now become a separate business unit of Molson Coors and is headquartered in the Czech Republic. StarBev is re-named Molson Coors Central Europe, with Mark Hunter as its Chief Executive Officer (‘CEO’). Mark Hunter earlier served as the CEO of Molson Coors UK & Ireland business.

Molson Coors Central Europe operates nine breweries and has a workforce of 4,100 people. The unit has a strong portfolio of more than 20 brands such as Borsodi, Kamenitza, Bergenbier, Ozusko, Jelen and Niksicko, which it sells in the regions of Czech Republic, Serbia, Croatia, Romania, Bulgaria, Hungary, Montenegro, Bosnia-Herzegovina and Slovakia. Molson Coors Central Europe’s flagship brand Staropramen is also distributed in more than 30 countries worldwide.

Molson Coors expects the acquisition to benefit its earnings in the first year of operation and improve the company’s production efficiencies, procurement and other systems, thereby leading to approximately $50 million of pre-tax operational synergies by 2015.

It will enhance the company’s portfolio with more than 20 new brands including Staropramen. Moreover, it will improve the beer volumes of Molson Coors, which have been on a decline since the past few years.

Our Recommendation

We are encouraged by the company’s shifting focus from the growth markets to the fast-growing emerging markets. The developed markets are saturated and are facing macroeconomic headwinds like rising unemployment and declining spending, which is therefore attracting these companies towards emerging markets like Europe, China, India, among others. The economic outlook of these fast growing nations is at present much better than the developed markets, due to the improving standard of living of the middle class.

We currently have a Neutral recommendation on Molson Coors. The stock has a near term recommendation with a Zacks #3 Rank (a short-term Hold rating).

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