Stock Option Trading News

This Bud Stops Here – Coors and Miller Team up to Compete in Domestic US Market

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

Covered Call Search
Symbol Stock
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
(For more details click the ticker symbol above)

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]

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