Brazil: Leo Kiely, who becomes chief executive officer of the merged company, Molson Coors Brewing Co. on February 9, says there's no chance he will shut down Molson's troubled operations in Brazil, according to an interview with The Globe and Mail after Adolph Coors Co. shareholders voted on February 1 in support of the deal.

Mr. Kiely said the future of Brazil is a "really important decision," but he rebuffed suggestions from one analyst that Molson Coors would be better off closing down the money-losing brewery. "I think the likelihood of shutting the brewery down is zip. That's obviously not what the game plan is. You look and there may be some consolidating of assets, but this is a valuable asset and we are going to look at it both executionally and strategically . . ." Mr. Kiely said. "One of the ironies of this is that everybody asks the question about Brazil. If we weren't in Brazil, we'd have it at the top of our wish list."

In 2002, Molson CEO Dan O'Neill spent nearly $1-billion for majority control of Cervejarias Kaiser Brasil SA, Brazil's second-largest brewer. In less than three years, the brewery has lost market share and fallen to the No. 3 spot behind Schincariol. Molson has already written down most of the value of its investment, while its minority partner Heineken SA has written down the entire value of the 20-per-cent stake that it owns.

Michael Palmer, president of Veritas Investment Research Corp. and a veteran beer industry analyst, said he doubts that Coors executives know more about running a brewery in Brazil than does Mr. O'Neill. He said the fact that Heineken has written down the entire value of the investment suggests that it has little value. "If it were me, I'd shut her down and walk away, but whether Coors has the determination to do that, I have no idea," said Mr. Palmer said.

Another possibility for Molson Coors is that it could seek to merge with Fomento Economico Mexicano SA (FEMSA), which owns a majority stake in Coca-Cola FEMSA, which distributes Kaiser's beers in Brazil. Mr. Kiely acknowledged that a merger with FEMSA might make strategic sense, but said he doesn't believe that the Mexican brewer of Sol and Dos Equis is interested. "What we sense from FEMSA is they're not making any decisions of a strategic nature over the short term," he said yesterday. "They've been fairly public that they really want to step back and understand where they want to go with both their soda and beer portfolios. I think you take them at their word on that."

Mr. Kiely said growing through mergers or acquisitions remains a key focus for Molson Coors. But he said the top priority over the short term will be regenerating profitable growth in Canada and the United States, continuing to profitably grow Coors' British operations and making a decision about whether to continue to strategically invest in the Brazilian business.

Despite significant shareholder opposition, Molson shareholders voted by more than 80 per cent in support of the merger last week. But Highfields Capital Management, one of the main opponents to the deal, has raised questions about whether its votes were properly counted. The Toronto Stock Exchange confirmed yesterday that it has received a complaint about voting irregularities.

A spokeswoman for CIBC Mellon, which tabulated the results, said one proxy could not be tabulated because the name on the ballot was not the same as the name on the registry.

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