Molson Coors Brewing Company (TAP) and SABMiller (UK:SAB) have entered into a joint operating agreement in the US and Puerto Rico in hopes of boosting profits.
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The companies hope to save money by combining distribution networks. The savings will then be reinvested in marketing and product development to hopefully expand their market share.
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SABMiller Chief Executive Graham Mackay was quoted in news reports as having said, “Given the highly complementary nature of our U.S. assets, operations and geographic footprint, this is a logical and compelling combination that we expect will create significant value for shareholders while benefiting distributors, consumers, retailers and the market overall.”
Currently Anheuser-Busch (BUD) holds 50% of the US beer market share. Miller holds 20% and Coors is fighting for market share at 11%. In Europe, Anheuser-Busch, Heineken (no US options), SABMiller, Inbev (privately held), and Carlsburg (no US options) are the top 5 beer companies by volume. Molson Coors and SABMiller will not change their European operating strategy as part of the new agreement.
The joint venture will be known as MillerCoors. Miller will have 58% financial interest and Coors will have a 42% stake. Both companies will have equal representation in voting matters, however.
The companies are estimating one half billion dollars in synergy savings over the next three years. The deal is subject to final agreement and regulatory approval and is expected by the end of 2007.
Looking at this news from an option trading perspective:
It is likely this joint venture will improve the operating efficiency of both of these companies. However, it is up to you to determine if the stocks of Molson Coors and SABMiller are still priced inefficiently low. SABMiller saw a jump today and Coors stock rose around 10.5%.
Ware most concerned with Molson Coors, because SABMiller does not offer US options.
For those Bud fans out there (you may have other rationale for believing the stock will do well in the near-term) we will include Anheuser Busch in the search as a bonus.
Potential Trades:
All of the following trades were found using the powerful search engine found exclusively at www.poweropt.com.
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| Symbol | Stock Price |
OPTION | Strike Info |
Option Bid |
Net Debit |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
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| BUD | 52.26 (+0.69) | BUDAK | 08 JAN 55.0 (101) | 1.25 | 51.01 | 2.4 | 2.5 | 7.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TAP | 56.72 (+0.57) | TAPKL | 07 NOV 60.0 (38) | 0.95 | 55.77 | 1.7 | 1.7 | 7.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUD | 52.26 (+0.69) | BUDLK | 07 DEC 55.0 (73) | 0.95 | 51.31 | 1.8 | 1.9 | 7.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUD | 52.26 (+0.69) | BUDKK | 07 NOV 55.0 (38) | 0.6 | 51.66 | 1.1 | 1.2 | 6.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TAP | 56.72 (+0.57) | TAPAK | 08 JAN 55.0 (101) | 4.4 | 52.32 | 7.8 | 5.1 | 5.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TAP | 56.72 (+0.57) | TAPAX | 08 JAN 52.5 (101) | 6 | 50.72 | 10.6 | 3.5 | 3.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUD | 52.26 (+0.69) | BUDAJ | 08 JAN 50.0 (101) | 3.8 | 48.46 | 7.3 | 3.2 | 3.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Competitors:
Competitors for BUD include: Molson Coors Brewing Company (TAP), and Companhia de Bebidas das Americas (ABV).
Competitors for TAP include: Anheuser-Busch Companies Inc. (BUD), and InBev NV/SA (private).
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[tags] InBev NV/SA, ABV, Companhia de Bebidas das Americas, BUD, Anheuser-Busch Companies Inc., TAP, Molson Coors Brewing Co., covered call investment strategy, investment strategy, poweroptions [/tags]