Anger follows Montana deal

By ELLEN READ markets writer

Brewer Lion Nathan has won control of the country's largest winemaker, Montana, in a deal which has left small shareholders out in the cold.

In a lightning raid yesterday, Lion spent around $180 million boosting its stake in Montana to 46.5 per cent - prompting similar outrage to that over Japanese brewer Kirin's own raid on Lion three years ago.

Such deals will be outlawed under a new takeovers code that takes effect in July. The new code contains rules similar to those in Australia, preventing an investor buying more than 20 per cent of a company unless an offer is made to all shareholders.

Ironically, it was the Kirin bid for Lion that prompted the code.

The code's backer, Commerce Minister Paul Swain, declined to comment on the latest deal, but said the new code would help.

"The takeovers regime in New Zealand is not robust and hasn't been particularly fair to small shareholders."

Montana's chairman Peter Masfen has vowed not to sell his 19.9 per cent stake in the company.

However, brokers say it will take only a few seconds on Monday, when trade in Montana shares resumes, for Lion to reach its 50.1 per cent target.

Its success in beating off rival bidder Allied Domecq prompted Montana's independent directors to accuse the Stock Exchange market surveillance panel of seriously damaging New Zealand's reputation among investors.

Lion raised its stake through a series of purchases from institutional shareholders, via late-night phone calls on Thursday.

As required by Stock Exchange rules, Lion will stand in the market on Monday to buy the remaining shares it is seeking.

"As soon as the market is opened it will be done because everybody's going to be queuing," said one broker.

"I'd say there would be 20, 30, 40 million shares on offer ..."

Trading in Montana shares was suspended all day yesterday.

Allied Domecq responded by waiving some of the conditions of its offer and saying its full takeover bid represented better value for shareholders.

On Wednesday, Montana's independent directors recommended shareholders accept Allied Domecq's offer for the entire company. Mr Masfen also indicated he was happy with the offer.

He told the Business Herald yesterday that he was not worried about becoming the holder of a minority stake. He also said he intended to stay on as Montana's chairman.

"[Lion] won't run it ... Our company still has 10,000 shareholders and it will have to be run in a proper, business-like way," Mr Masfen said.

He declined to comment on the waiver given by the Stock Exchange which enabled Lion to pursue the deal immediately. Without the waiver, Lion would have been forced to wait two days before approaching potential sellers, giving Allied Domecq time to reconsider its bid.

"Obviously, I would have feelings on that but I guess because the matter is before the Stock Exchange it's inappropriate for me to comment," he said.

Allied Domecq's chief executive, Philip Bowman, said the firm's offer remained on the table. "However, if sufficient shareholders accept Lion Nathan's offer to deliver Lion Nathan control of the company, then I can only convey my sympathies to the locked-in 49 per cent minority," he said.

In a letter to the exchange, Montana's independent directors said they believed Allied Domecq would have made a counter offer if it had been given more time - something the waiver denied them.

"We believe that the panel's actions have been seriously detrimental to the interests of minority shareholders in this company and that the reputation of the New Zealand Stock Exchange will have been seriously damaged in the world's financial markets," said Montana deputy chairman Barry Neville-White.

Mr Neville-White said Lion had rejected a request that it make its offer to increase its shareholding from 28 per cent to 50.1 per cent on a pro rata basis to all shareholders.

Another sharebroker said the treatment of minority shareholders throughout the process had been a disgrace and would deter large overseas companies from investing in New Zealand.

Though the exchange conceded yesterday that details of the takeover offers had been released "within a relatively short time," it claimed that investors had adequate notice of the likelihood of a takeover battle.

Its decision to halt trading was nevertheless prudent, it said in a statement.

No one from Lion Nathan would discuss the company's plans for Montana.

Spokesman Warwick Bryan said it was inappropriate for the company to talk when it had not yet acquired the 50.1 per cent stake in Montana it was seeking.

He said if and when that happened, Lion would be happy to comment on future intentions.

Its offer of $4.65 a share values Montana at roughly $1 billion.

Links