I don’t know how many of you have been following the Miller Coors story, but the Justice Department gave its blessing to the joint venture combining the U.S. operations of SABMiller and Molson Coors (see Justice Department Clears SABMiller-Molson Deal). The venture will be called Miller Coors.

The approval was not entirely unexpected. Although I am not an expert in antitrust issues, the consensus was that this deal would not vastly alter the competitive landscape. However, I will point out that Miller Coors and Anheuser Busch will now collectively control about 80% of the U.S. beer market (sounds fairly concentrated to me).

Antitrust issues notwithstanding, now the hard work begins – combining the two firms. For those of you who have followed my blog, you know where I stand on this deal (see Now Introducing Miller Coors, JV??? and Miller Coors JV for background).

I basically suggested that I thought the deal should have been structured as an acquisition rather than a joint venture, and that the joint venture structure would strain the union. Back in November I wrote:

In my opinion, a joint venture between SAB and Molson Coors in which each shares equally in the decision rights will run into many conflicts…Sharing power across firms in a joint venture can lead to conflicts over the appropriate way to go about running the new business, can result in delays in achieving synergies, can lead to greater staff defections, and can result in greater than necessary managerial costs. All this ultimately stands to hurt the performance of the new venture, and these kinds of deals can quickly devolve into an ugly power struggle between senior managers from two companies that don’t understand each other’s culture.

Because the potential for synergies, the opportunity for pricing power, and the ability to create a more formidable competitor vis-a-vis Anheuser-Busch are all so great between Miller and Coors, centralized ownership (with one firm and one set of managers calling the shots) would be a more effective way to achieve those benefits. I therefore have this uneasy feeling that “management problems” will plague this joint venture in the months and years to come.

So congratulations Miller Coors, …and good luck!

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This entry was posted on Tuesday, June 10th, 2008 at 7:56 pm and is filed under Business Strategy, Corporate Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.