USA: Molson, Coors misled investors, lawsuit alleges
Disappointing first-quarter results that were followed by a 20 % drop in the stock price of Molson Coors Brewing Co. led one shareholder to file a federal lawsuit Monday, July 11, claiming the merger that created the company in February was misrepresented to shareholders, according to Associated Press.
Brian Crombie, who is seeking class action status, claims the two companies "issued materially false and misleading statements of fact to the market" when it asked shareholders in January to approve the deal.
Crombie's lawsuit claims that shareholders were told "the merger would result in synergies and cost savings and that the combination of Coors and Molson would result in a substantially stronger and more profitable company."
Instead, the first-quarter earnings of the combined companies, reported in late April, were disappointing, according to the lawsuit, and resulted in class B shares of the company falling almost $14.50 per share to $63, or almost 20 percent.
Leo Kiely, president and CEO, in April said weak industry conditions as well as lack of volume growth in Canada, the United States, the United Kingdom and Brazil affected Molson Coors' results. The company's reported quarterly loss - excluding one-time items - initially was reported at $5.1 million then revised in May to $8.4 million.
Molson Coors spokeswoman Kabira Hatland declined comment.
The Golden-based Adolph Coors Co. and the Montreal-based Molson Inc. merged in February to form Molson Coors.
Investors were erroneously lead to believe that the "financial and operational strength of Coors" would help the combined company reach its projected goals, the lawsuit says. But Coors was not performing up to the standards it originally reported.
The companies violated the terms of the merger by failing to disclose that Coors' business was performing "well below plan and consensus estimates," the lawsuit states.
Crombie is seeking monetary and other damages.
Crombie's lawsuit is one of several that have been filed alleging the world's fifth-largest brewer and some of its officers and directors misled shareholders by not disclosing first-quarter business trends before shareholders voted on the merger, the company said in a filing with the Securities and Exchange Commission, which is seeking documents related to the merger.
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