Molson Coors Drunk Dials Emerging Markets in $3.5B Beer Deal (Update 1)

Updated to reflect Goldman Sachs, Fitch comments and analyst estimates

NEW YORK (TheStreet) -- Molson Coors'(TAP) $3.5 billion push into heavy-drinking emerging economies may come up light on beer growth.

To combat declining sales in key U.S. and Canadian beer markets and falling profits, the maker of Coors Light and Molson announced a foray into recovering eastern European markets with the acquisition of Czech Republic-based StarBev, the brewer of Staropramen beer.

But the U.S.-Canadian beer conglomerate may be targeting the wrong emerging economy.

A closer look at Molson Coors' acquisition and its strategy of counting eastern Europe as a growth market casts doubt on whether the struggling beer company put its cash and balance sheet to work in the most effective way for shareholders.

"We are not as constructive as management is on the deal as we believe TAP is a more attractive story when deploying capital back to shareholders and focusing on an improving U.S. market," JPMorgan analyst John Faucher wrote in a note Tuesday.

Going into this year, Molson Coors shares were recovering from a big 2011 slide as the company launched its first post-crisis share buyback program in September and added to it at the end of the year. The Denver-based company also raised its quarterly dividend from 28 cents to 32 cents in June. Tuesday's deal could halt Molson Coors' share momentum, as the company is bottling up the buyback program in favor of funding the acquisition.