Between the lines: Panel's foot crushes rival bid in wine takeover

"A gigantic cock-up." That's what sharebrokers and investors large and small are calling the Stock Exchange's relaxation of its listing rules for Lion Nathan's raid on Montana.

The decision has frozen out competing bidder Allied Domecq and most of Montana's small shareholders.

The move can only add to the local market's lamentable reputation as a place where cowboys still roam. And it's another warning to the Australian Stock Exchange that any road to merger with its Kiwi counterpart is full of regulatory rocks.

New Zealand is almost unique in allowing an investor to gain control of a company by making a partial takeover bid in which most shareholders will be unable to participate. Although a takeovers code being introduced by the Government in July will put an end to such unfairness, that is small consolation for Montana shareholders.

Incredibly, the exchange's market surveillance panel (which operates independently of the exchange's board) took the extra step into left-field by granting Lion a waiver so it could begin its bid yesterday - rather than Monday, as required under the listing rules. The rules require a delay to allow investors to assess their position and for any counter-bids to be prepared.

The waiver gave institutional shareholders less than 24 hours to make a decision between the two bids. Lion's bid is partial but at a higher price than Allied's.

Of course they went with Lion. Who could afford to wait for a counter-bid that might not come?

Montana's independent directors say Allied was planning to prepare a counter-bid over the weekend, in the belief that New Zealand's listing rules gave them the space to do so.

In granting the waiver, the panel was well-intentioned but badly misread the situation.

It believed it was creating a level playing field by allowing Lion into the market at the same time as Allied. But instead, it granted Lion an advantage it exploited to the full, cutting Allied out of the picture along with Montana's small shareholders.

One of many brokers venting their spleen yesterday swears he'll eat his hat if curtailing the panel's power to grant waivers isn't at the top of the agenda for the exchange's next board meeting.

The exchange might also want to look at improving its communication with its broker members. With trading in Montana shares suspended all day yesterday, and confusion abounding, brokers were finding it difficult to give meaningful advice.