Breakingviews-Fevertree's Molson Coors Brew Tastes Bittersweet

Fevertree's stock is up more than 22%, on the way to achieving its biggest intraday rise ever, after the London-listed mixer-maker said it reached an agreement with Molson Coors over its U.S. operations. Molson Coors will hold exclusive sales, distribution and production of the Fevertree brand in the U.S., and will become its second largest shareholder after acquiring an 8.5% shareholding for 71.0 million pounds ($88.4 million) in cash. Below is a selection of analysts' comments:

Fevertree's Partnership in the U.S. Is a Transformational Deal

0943 GMT - Fevertree Drinks' strategic partnership with Molson Coors in the U.S. is a game changer, Jefferies analysts say in a note. The U.K. mixer-maker will benefit from a significant uplift in scale and capability in its largest market, they say. Molson Coors will become Fever's second-largest shareholder with an 8.5% stake, which points to a high degree of alignment with the brand owner, the analysts say. The deal will also boost the quality of earnings, driving both profitability and cash generation, they add. Looking ahead, Fevertree is expected to deliver double-digit percentage growth in both sales and profit, as the new structure is embedded. By 2028, sales are expected at 499 million pounds, from 367.9 million pounds in 2024, and EPS at 50.8 pence from 23.9 pence, they say. Fevertree shares are up 21.4% at 799 pence. (michael.susin@wsj.com)

Fevertree's U.S. Partnership Means Loosing Control Over its Largest Market

1037 GMT - Fevertree's partnership with Molson Coors in the U.S. represents a meaningful change in the U.K. mixer-maker's investment case, Goodbody analyst Fintan Ryan says in a note. On the positive side, Fevertree will receive cash up front to return to shareholders while Molson Coors will assume the operational costs and risks from executing the long-term growth potential of the brand in the U.S., the analyst says. However, Fevertree will also lose direct control of its largest market, a region where the company still is performing well and has the clearest strategy for market share growth, the analyst adds. Shares are up almost 25% at 814.0 pence, on track for their biggest intraday rise. (michael.susin@wsj.com)

Fevertree's Partnership with Molson Coors to Boost Shareholder Returns

Fevertree Drink's agreement with Molson Coors over its operations in the U.S. is likely to lead to increased returns to shareholders, Panmure Liberum analysts Anubhav Malhotra and Wayne Brown say in a note. the London-listed mixer-maker will receive a part of the profits from the U.S. operations as a royalty, they say. This should materially improve over time and Fevertree is guaranteed to take a minimum share of the profits over 2026-30, the analysts add. Molson Coors's acquisition of an 8.5% stake in Fevertree provides a long-term supporter and a potential eventual acquirer of the company, they add. "Guaranteed profits for five years and no working capital investment requirement in the U.S. should free up significant cash flow for the group to return to shareholders," the analysts say. (michael.susin@wsj.com)

Fevertree's Deal Endorses Its Progress in the U.S.

1334 GMT - Fevertree's partnership with Molson Coors in the U.S. brings a number of benefits for the mix-maker, but the main one is the endorsement of what the brand has built there, AJ Bell investment director Russ Mould says in a note. Molson Coors has seen Fevertree as a way to diversify its offering amid a shift in consumer habits, he says. Choosing Fevertree also acknowledges that the company has built a significant position in the U.S. despite the recent issues with costs and supply chain, Mould adds. "Molson taking a meaningful stake in the business also underscores its commitment to the partnership and could even translate into a full takeover," he says. The deal will also reduce Fevertree's costs, meaning it will have cash available for shareholders' returns or to invest in expansion, Mould says. (michael.susin@wsj.com)

Molson Coors Beverage has an average rating of hold and mean price target of $62.29, according to analysts polled by FactSet.