Molson Coors (TAP) and London's SABMiller agreed to combine their U.S. operations in a joint venture called Miller Coors.

The combined company will have annual revenue of $6.6 billion and annual sales of 69 million barrels. The new operation amounts to a challenge to the leading U.S. brewer, Anheuser Busch ( BUD), which owns more than 40% of the U.S. beer market.

The brewers said SABMiller will own 58% of the unit, which will operate in the U.S. and Puerto Rico but not Molson Coors' stronghold market of Canada. Molson Coors will own 42%. The sides will share equal voting power.

"This transaction is driven by the profound changes in the U.S. alcohol beverage industry that are confronting both of our companies with new challenges," said Molson Coors Vice Chairman Pete Coors. "Consumers are broadening their tastes and are increasingly looking for greater choice and differentiation; wine and spirits companies are encroaching on traditional beer occasions, and global beer importers and craft brewers are both taking a larger share of volume and profit growth. Creating a stronger U.S. brewer will help us meet these challenges, compete more effectively and provide U.S. consumers with more choice, greater product availability and increased innovation. The Molson and Coors families are firmly in support of this strategic transaction."

The combination of the businesses is expected to result in identified annual cost synergies of $500 million, to come from optimization of production over the existing brewery network, reduced shipping distances, economies of scale in brewery operations and the elimination of duplication in corporate and marketing services.

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