CHICAGO Molson Coors Brewing Co (TAP.N) sees itself as a buyer of brands in the near future, but the maker of Molson Canadian and Coors Light beers is aware that the threat of being taken over is always there.
Chief Executive Peter Swinburn told the Reuters Food and Agriculture Summit in Chicago that Molson would be more inclined to make acquisitions than to sell assets as it battles for market share in the mature beer markets of the United States, Canada and Britain.
Even though Molson's business is concentrated in mature markets, Swinburn said Molson still favors developed markets for acquisitions rather than emerging markets as deals in developed markets give a quicker, less-risky return to shareholders.
"If we were to make any move, and we certainly don't have to in M&A (mergers and acquisitions) -- anything significant would not be in emerging markets because it's too risky," Swinburn said on Wednesday.
He added that any deal has to add to earnings in the short term, be above the weighted average cost of capital and give a good shareholder return quickly, and that it is harder to get over these hurdles for emerging-market acquisitions.
"Would we make a big bet on developing markets as a next move? No. Any deal that we do it has to be accretive short-term," Swinburn added.
In its last big overseas investment, Molson bought Brazilian brewer Kaiser for $765 million in 2002, but after a tough time and following its 2005 merger with Coors, the brewer sold Kaiser to Mexico's FEMSA (FMSAUBD.MX) for a dramatically lower $68 million in 2006.
Heineken (HEIN.AS) agreed to buy FEMSA's beer business earlier this year to bring Kaiser under Dutch ownership.
Molson Coors, which also makes Blue Moon and Carling, last month posted a lower-than-expected fourth-quarter profit on weak sales volume across all markets and issued a tepid volume forecast for 2010.
At the time, Swinburn cited high unemployment as a reason. He said fourth-quarter sluggishness was continuing into the first quarter.
A FAMILY AFFAIR
Molson is considered a "controlled company" under New York Stock Exchange listing standards, because more than half of its voting power is controlled by the Coors and Molson families.
Still, Swinburn said "we never, ever think we are protected in any way" from the threat of a takeover. "It's down to the performance of the business."
"Both families want to be in the business for the long haul," he said. "The reality is that if you don't run the business to the best of your ability and actually generate the sort of profits, cash and return to shareholders that shareholders demand, it doesn't matter what company you are."
Stifel Nicolaus analyst Mark Swartzberg said earlier on Wednesday that Molson was "a great take-out candidate."
"I think it's more a question of when than whether," Swartzberg said, referring to a possible future decision by the Molson and Coors families to sell the business.
He said SABMiller PLC (SAB.L), Molson's partner in the MillerCoors joint venture, would be a natural fit as a buyer. The venture, formed in 2008, combined the U.S. operations of MolsonCoors and SABMiller
Swinburn said the families often side with the board of directors, which is made up of Swinburn, four family members and nine independent directors. He also played down the idea of a tie-up with SABMiller.
"That deal was so compelling for both SAB and ourselves, it was a deal we had to do, but it begins and ends there," he said of the MillerCoors venture. "We obviously talk to each other about MillerCoors, but we don't talk to each other about anything else."
Swinburn said he expects Molson Coors' UK market share to stabilize or improve in 2010 after price increases and decisions to stop selling some brews cut into share in 2009.
"We would see that coming back to a normal position this year, if not improving," Swinburn said.
The company is holding market share, if not increasing it, in the United States and is adding market share in Canada, Swinburn said.
Molson Coors stock ended up 0.3 percent at $43.46 on the New York Stock Exchange on Wednesday.
(Additional reporting by Brad Dorfman, editing by Matthew Lewis and Steve Orlofsky)