Molson Coors Brewing (TAP) Stock Gains on $12 Billion MillerCoors Deal
NEW YORK (TheStreet) -- Molson Coors Brewing Co. (TAP) - Get Report stock is up 0.14% to $88.41 in mid-morning trading on Wednesday after the brewer agreed to acquire SABMiller's (SBMRY) 58% stake in MillerCoors in a transaction valued at $12 billion.
Molson Coors currently owns 42% of MillerCoors, a U.S. joint venture that SABMiller and Molson Coors formed in 2008.
The company will finance the acquisition through a combination of cash and issuance of new debt and equity.
The acquisition is conditioned upon the closing of Anheuser Busch InBev's (BUD) $106 billion acquisition of SABMiller, which is expected to close in the second half of 2016.
TheStreet's Jim Cramer, portfolio manager of the Action Alerts PLUS charitable trust portfolio, has this to say about the transactions: "A great deal for all companies involved. [AB InBev] will have amazing scale and be able to tower over its suppliers. [Molson Coors] is doing equity to fund the deal and I bet the deal might actually come at higher prices."
Molson Coors expects the acquisition to add about $4.7 billion in revenue and lead to at least $200 million in annual synergies by 2020.
Separately, TheStreet Ratings team rates MOLSON COORS BREWING CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate MOLSON COORS BREWING CO (TAP) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, solid stock price performance, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Beverages industry. The net income increased by 148.3% when compared to the same quarter one year prior, rising from -$34.40 million to $16.60 million.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- MOLSON COORS BREWING CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MOLSON COORS BREWING CO reported lower earnings of $2.75 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($3.79 versus $2.75).
- The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.71 is somewhat weak and could be cause for future problems.
- 48.23% is the gross profit margin for MOLSON COORS BREWING CO which we consider to be strong. Regardless of TAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.63% trails the industry average.
- You can view the full analysis from the report here: TAP
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.