Acquisition of Molson Coors Central Europe

6 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Acquisition of Molson Coors Central Europe

Acquisition of StarBev

General

In accordance with our strategy to increase our portfolio of premium brands and deepen our reach into growth markets around the world, we completed the Acquisition of StarBev from StarBev L.P. (the "Seller") on June 15, 2012 for €2.7 billion (or $3.4 billion), including the assumption and payoff of pre-existing StarBev indebtedness. Headquartered in Amsterdam and Prague, StarBev is one of the largest brewers in Central Europe. StarBev, which we renamed Molson Coors Central Europe ("MCCE"), operates nine breweries in Czech Republic, Serbia, Croatia, Romania, Bulgaria, Hungary and Montenegro and sold approximately 13.3 million hectoliters of beer in 2011. It also sells its brands in Bosnia-Herzegovina and Slovakia. In 2011, StarBev held a top-three market share position in each of its markets, and its brand portfolio includes local champions such as Staropramen, Borsodi, Kamenitza, Bergenbier, Ozujsko, Jelen, and Niksicko, and it also brews and distributes other brands under license. Staropramen is distributed and sold in over 30 countries. The operating results of MCCE are reported in our new Central Europe operating segment. We incurred acquisition-related costs of $25.3 million and $31.4 million, included in Marketing general and administrative expenses in the second quarter and first half of 2012, respectively. We also incurred financing-related expenses as further described in Note 8, "Other Income and Expense" and Note 13, "Debt."

Unaudited Pro Forma Financial Information

MCCE contributed Net sales of $57.3 million and Income from continuing operations before income taxes of $12.4 million from the Acquisition date of June 15, 2012 through June 30, 2012. The following unaudited pro forma summary presents our Condensed Consolidated Statements of Operations as if MCCE had been acquired on December 26, 2010, the first day of our 2011 fiscal year. These amounts were calculated after conversion to U.S. GAAP, conforming to our accounting policies, and adjusting MCCE's results to reflect the depreciation and amortization that would have been charged assuming the preliminary fair value adjustments to Properties, net and Other intangibles, net resulting from the purchase had been applied from December 26, 2010, together with the consequential tax effects. These adjustments also reflect the removal of StarBev historical interest expense, the addition of interest expense to be prospectively incurred on the debt issued to finance the purchase and the removal of the previously mentioned acquisition-related costs. Additional significant adjustments include the removal of the following non-recurring, transaction-related costs: a $57.9 million Euro currency loss, a $39.2 million Treasury Lock loss, and bridge facility costs of $13.0 million, as further described in Note 8, "Other Income and Expense" and Note 13, "Debt", as well as expense of $8.6 million related to the fair value adjustment to acquisition date inventory. This unaudited pro forma financial information is not intended to reflect the performance which would have actually resulted had the Acquisition been effected on the dates indicated. Further, the unaudited pro forma results of operations are not necessarily indicative of the results of operations that may be obtained in the future.

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 30, 2012		June 25, 2011		June 30, 2012		June 25, 2011
	(In millions)
Net sales	$	1,200.5	$	1,231.5	$	2,031.3	$	2,069.4
Income from continuing operations before income taxes	279.7		315.8		347.5		395.3
Net income attributable to MCBC	$	241.4	$	267.3	$	299.4	$	336.6
Net income per common share attributable to MCBC:
Basic	$	1.33	$	1.43	$	1.65	$	1.80
Diluted	$	1.32	$	1.41	$	1.64	$	1.78

Fair Value of the Purchase Price

The following table summarizes the purchase price, inclusive of pre-existing debt assumed and subsequently repaid, to acquire StarBev:

	Fair Value
	(In millions)
Cash consideration to Seller	$	1,816.0
Fair value of convertible note issued to Seller(1)	645.9
Senior debt facilities with third-party creditor(2)	585.0
Total consideration	$	3,046.9
Cash and bank overdraft acquired(3)	$	(42.3	)
Subordinated deferred payment obligation ("SDPO") with third-party creditors(4)	423.4
Total purchase price, inclusive of pre-existing debt assumed and subsequently repaid	$	3,428.0

(1) We issued a €500 millionZero Coupon Senior Unsecured Convertible Note due 2013 to the Seller upon close of the Acquisition. See Note 13, "Debt" for further discussion.

(2) According to our agreement with the Seller and in accordance with the terms of the senior debt facility agreement, upon close of the Acquisition, we immediately repaid pre-existing StarBev third-party debt including accrued interest.

(3) Consists of $143.6 million of cash acquired and $101.3 million of bank overdrafts assumed as part of MCCE's cash pool arrangement. See Note 13, "Debt" for further discussion.

(4) We assumed the pre-existing StarBev $423.4 million SDPO payable to third-party creditors, which we subsequently repaid on June 29, 2012, in accordance with the terms of the SDPO agreement. The SDPO was held by private investors and accrued interest at 11%. The settlement of the SDPO was not required by our agreement with the Seller.

The following table represents the classifications of the cash flows used, which are included within our Condensed Consolidated Statements of Cash Flows:

	(In millions)
Operating activities(1)	$	1.4
Investing activities(2)	2,257.4
Financing activities(1)	424.3
Total cash used	$	2,683.1
Non-cash(3)	$	645.9

(1) Includes the SDPO discussed above, which was subsequently repaid on June 29, 2012 for $425.7 million including the $1.4 million of interest incurred subsequent to the close of the Acquisition noted as "Operating activities" in the table above.

(2) Includes $1,816.0 million of cash consideration to the Seller for shares acquired and release of StarBev's pre-existing obligations to the Seller. Also, included is $585.0 million of pre-existing third-party debt immediately repaid in accordance with our agreement with the Seller and the terms of the senior debt facility agreement. This amount is presented net of cash acquired of $143.6 million.

(3) Reflects the $645.9 million fair value of the convertible note issued to the Seller upon close of the Acquisition. See Note 13, "Debt" for further discussion.

Preliminary Allocation of Consideration Transferred

The following table represents the preliminary allocation of the total consideration to MCCE's identifiable net assets, fair value of the noncontrolling interest in MCCE, and resulting residual goodwill as of June 15, 2012. These allocated amounts are subject to revision when our valuation and tax-related adjustments are finalized, which we expect to occur during 2012.

	Fair Value
	(In millions)
Cash and cash equivalents	$	143.6
Current assets(1)	262.1
Properties, net	555.6
Other intangibles, net(2)	2,525.1
Other assets	44.5
Total assets acquired	$	3,530.9
Current liabilities(3)	846.0
Non-current liabilities(4)	431.0
Total liabilities assumed	$	1,277.0
Total identifiable net assets	$	2,253.9
Noncontrolling interest measured at fair value	38.5
Goodwill(5)	831.5
Total consideration	$	3,046.9

(1) Includes trade receivables of $152.2 million and inventory of $57.3 million.

(2) See Note 12, "Goodwill and Intangible Assets" for further discussion.

(3) Includes the $423.4 million SDPO assumed, which was subsequently repaid for $425.7 million on June 29, 2012.

(4) Includes $409.9 million of deferred tax liabilities.

(5) The goodwill resulting from the Acquisition is primarily attributable to MCCE's licensed brand brewing, distribution and import business, anticipated synergies and the assembled workforce. All of the goodwill was preliminarily assigned to the new Central Europe segment and is not expected to be deductible for tax purposes. See Note 12, "Goodwill and Intangible Assets" for further discussion.