Coors Looks North to Molson

Adolph Coors (NYSE: RKY  ) is often the forgotten man when people are discussing the beer business, and that really isn't surprising: SABMiller has more than $8 billion in sales, while Anheuser-Busch (NYSE: BUD  ) is more than $14 billion. With Coors well behind even SABMiller's number and holding a relatively small share of the beer-bellied U.S. market, that's easy to understand.

Yesterday, however, the company let it be known that it thinks its mug is half full, rather than half empty -- and that's half full with beer, not foam. It did so by announcing to the world that it was in talks to buy Molson, the Canadian brewer and its business partner. The companies sell each other's brands on opposite sides of the border.

Details were slim in yesterday's news release, and the companies said they wouldn't make any further comments until they either took each other's hands or left the negotiating table. Heck, announcements such as yesterday's are unusual enough. They usually take place when merger rumors make their way to the reputable side of the financial press, as appears to have happened in this case. (The hot pink Financial Times got credit for yesterday's scoop.)

Cynics might say such rumors are often leaked: At any rate, Coors shares got a nice little pop on the news yesterday. The reason seems simple enough: Coors needs to move aggressively if it hopes to maintain market share growth and the scale expansion needed to keep up margins in this ever-globalizing, highly competitive sector. The battle for position in the relatively low-dollar-per-barrel Chinese market, won in the end by Bud after SABMiller (part owned by Altria (NYSE: MO  ) ) backed away from its offer for Harbin, is the latest exhibit in this case.

The downside for Coors, however, is that the news now announces to the world that Molson and its approximately $2 billion (and operational superiority to Coors) in sales is willing to listen to suitors. Can Coors secure Molson at a price that doesn't create as many problems as it purports to address if its better-heeled competitors decide to swing by Montreal with a suitcase full of Canadian dollars? Put simply, there are a lot of ways this can go wrong for the Colorado company. Mergers are rarely a simple business.

Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.