updated 7/19/2004 12:38:48 PM ET 2004-07-19T16:38:48

Adolph Coors of the U.S. and Molson of Canada are in talks about a possible merger that could create a strengthened competitor among North America's big brewers with sales of almost $6 billion, according to people familiar with the matter.

A deal, if struck, would marry two mid-sized brewers that have been struggling to compete with the industry's titans — Anheuser-Busch, SABMiller, and Interbrew.

It would also mark the third significant transaction in the global beer industry this year after Interbrew's $10 billion link-up with AmBev of Brazil and Anheuser-Busch's deal to take over Harbin Brewery of China, following a bidding war with SABMiller in the first contested takeover battle there.

Coors and Molson already have a partnership agreement under which each sells the other's products in their home markets. Although Coors' $4 billion revenues last year were more than twice Molson's $1.9 billion, their market capitalizations are similar at about $3 billion, thanks partly to Molson's superior profitability.

Both are also family dominated — although that could complicate attempts to bring them together.

Speculation that Molson, controlled by the Molson family for the past 218 years, might be looking to merge flared up last month after five board members decided not to seek re-election following a family split.

Flagging sales in Canada, where it has 45 percent of the market, and the poor performance of Cervejarias Kaiser, its Brazilian unit acquired two years ago, were also seen to increase its vulnerability.

Coors, based in Colorado and the number three U.S. brewer, has also been struggling. It lacks the size and resources needed to compete with two much bigger U.S. rivals — Anheuser-Busch and SABMiller.

Coors Light, its most popular U.S. brand, has been blindsided as its competitors capitalized on the low-carbohydrate diet trend.

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.


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