King hit for Lion offer on Montana

By DITA DE BONI liquor writer

Lion Nathan's march to control Montana Group sustained a body-blow yesterday, with the brewer suspended from buying shares in the winemaker until the legality of its latest offer is proved.

In the umpteenth legal snag during its sharemarket battle, Lion's two-tiered offer for the 56 per cent of shares in Montana it does not own will be scrutinised by the Takeovers Panel behind closed doors on Monday.

That means two regulatory bodies are now investigating the controversial Lion offer.

Today, the market surveillance panel standing committee will consider whether the offer breaches its original defaulter securities decision that forced the brewer to relinquish 19 per cent of Montana.

Then on Monday, the Takeovers Panel will consider whether the offer breaches the new takeovers code, which came into force on July 1.

Both the committee and panel had little to say on the issue.

The question market commentators were left with is: What will happen if the two bodies find differently during their deliberations?

Commerce Minister Paul Swain was unwilling to wade into the issue last night.

"The market surveillance panel deals with the listing rules of the exchange and the standing committee's decisions," he said.

"The Takeovers Panel deals with a possible breach of the takeovers code.

"They are both independent bodies and any further comment should come from them."

Lion Nathan was offering $5.50 a share for 11 per cent of Montana and $3.70 for the remainder.

The market originally conceded that the offer was legal under the takeovers code because it offered the $5.50 to all shareholders, with acceptances to be scaled back on a pro-rata basis.

Though a legal manoeuvre, the two-tiered offer has been planned to take advantage of a loophole in the law - one that was plugged in Australia more than a decade ago.

It is believed that the issue before the panel is whether Lion's offer is in fact two offers, which is legal, or one offer with two parts, which is not.

The issue is also one of Lion's intent.

The panel says Lion Nathan "may not have acted or may not be acting or may not intend to act in compliance with the takeovers code," citing a paragraph of Lion's offer stating "shareholders will ... have the opportunity to divest any remaining shares in the subsequent offer."

"If all shareholders, except Allied Domecq, accept both offers for all their shares, [they] will receive an average of no less than $4.38 per share ...

"Lion Nathan is committed to acquiring 100 per cent of [Montana]," the offer stated.

The standing committee will try to determine if there is a "wink-wink, nudge-nudge" deal implied by Lion Nathan when it sells its defaulter shares while offering to buy them back under the controversial deal, something forbidden under both the code and by the committee's decision.

Lion spokesman Warwick Bryan was unwilling to comment yesterday, saying only that the brewer would front up with legal arguments today and Monday.

Allied Domecq spokeswoman Jane Mussared said Allied had raised issues with the standing committee but had not taken a complaint to the Takeovers Panel.

"I guess they got to it themselves," she said.

Allied shared the panel's concerns about the Lion offer.

Institutional shareholders waiting to buy and then sell Montana shares are in a less certain position than they were a week ago.

One said buying then selling the shares last week would have reaped a profit, but gains were far from certain now.

Armstrong Jones analyst Shane Solly said Lion would probably have to alter its potential offer to be in the running for control of Montana.

"Our position is that [today's event] has created some more uncertainty to what was already a complex situation."