Molson Inc. stock jumped Friday after the Canadian brewer and Adolph Coors Co. dramatically increased a special dividend to persuade wavering shareholders to approve their proposed union to create a $6 billion brewer.
The sweetened offer came late Thursday after several shareholders, including some with significant holdings, said they would oppose the merger because they did not believe they would receive fair value for their stock.
The change should be enough to convince most to approve the merger, said Michael Van Aelst, who tracks Molson for CIBC World Markets Inc.
“We’ve seen some big shareholders already switch sides,” he said. “Overall, I think this will be enough to get it done.”
After several days of mounting opposition, the family-run brewers said they would increase the special dividend they had planned to offer Molson shareholders by 67 percent to $4.53 per share, or a total of $532 million.
Molson Chairman Eric Molson, a member of the Canadian-based brewer’s founding family, agreed to waive participation in the dividend, which amounted to about $50 million.
Molson spokeswoman Sylvia Morin said executives believed the merger was at risk.
“The change was really one of looking at the pressure building, looking at the momentum that was building and, at one point, just saying it would be a challenge to reverse that momentum unless something like this happened,” she said.
The combined Molson Coors Brewing Co. would have sales of about $6 billion and brands that include Coors Original, Coors Light, Keystone, Molson Canadian and Carling. It would rank fifth globally in terms of revenue and number of barrels sold.
The dividend decision came on the heels of meetings that Coors and Molson executives had with shareholders this week in an effort to shore up support ahead of the planned votes.
Several shareholders have contended the proposed merger was not equitable and did not give them enough money for their holdings. In past months, many analysts and shareholders have suggested an increased dividend or premium.
Ian Molson, the brewery’s former deputy chairman who tried unsuccessfully to mount a rival bid for Molson, said he would vote against the merger, calling it a “bad transaction” for Molson shareholders.
He noted that Molson, which has a larger market capitalization, higher profitability and a stronger domestic base, would shift to a new U.S. headquarters with two Coors executives in charge.
Adding to the pressure was a Wednesday announcement from London-based brewing giant SABMiller PLC that it was interested in making a bid for Molson Inc. if the merger failed.
One of Molson’s largest shareholders — AIM Trimark Investments, with about 14 percent of Class A shares — said it would support the merger after the announcement.
In an interview Friday, portfolio manager Ian Hardacre said their concern was never about the concept of the merger but about whether they would be getting fair value.
“It was more an issue of price for us of what we thought the business was worth,” he said. “Without question, the new company is a far better option than Molson on a stand-alone basis.”
The companies also pushed back shareholder votes on the deal from Jan. 19 to Jan. 28 for Molson and Feb. 1 for Coors. A meeting for Molson options holders was set for Jan. 27.
The two family-controlled breweries first proposed the union six months ago, saying it was necessary to help them better compete globally in the fast-consolidating industry. They said the merger would create $175 million in cost savings and give them more financial muscle in the marketplace.
Under the proposed deal, each Molson Class B share will be exchanged for a 0.126 voting share and 0.234 nonvoting share of the combined company, Molson Coors. Each Molson Class A share will be exchanged for 0.360 nonvoting share of Molson Coors. Coors shareholders will receive one share of Molson Coors for each share of Coors.
Based in suburban Golden, Coors is the third biggest U.S. brewer behind Anheuser-Busch and SABMiller. Molson is the No. 1 brewer in Canada, just ahead of Interbrew SA’s Labatt Brewing.