Kirin will pay Kiwis $360m for Lion

The Lion Brewery in Newmarket. Photo / Brett Phibbs

New Zealand shareholders in Lion Nathan stand to receive about $360 million from Kirin Holdings as the Japanese beverage giant completes its takeover of the brewer.

However, brokers are not expecting significant reinvestment of the cash in local shares.

Kirin has agreed to pay A$3.5 billion ($4.4 billion) for the 54 per cent of Lion Nathan it does not already own.

The takeover price includes A$11.50 a share to be paid by Kirin, and a further 72c to be paid by Lion Nathan as a fully franked cash component.

Lion Nathan's non-Kirin directors have unanimously backed the deal subject to a report that it is in the best interests of shareholders and there is no higher offer.

Lion Nathan, formerly one of New Zealand's largest corporates but now based in Australia, is still listed on the NZX as well as Australia's ASX.

The last annual report shows there are 5829 New Zealand shareholders with a total of 23 million shares, now worth $359.26 million at Kirin's offer price.

But ABN Amro's Nigel Scott did not expect a great deal of the cash New Zealand investors received would find its way into New Zealand stocks.

"I would suggest now that for a lot of New Zealand shareholders, it is viewed as Australian dollars, and if anything they'd look to reinvest in Australia."

Scott pointed out that much of the New Zealand holding of the company was through institutional investors who tended to look at asset quality and asset class.

"In New Zealand, outside Delegat's, where's another listed entity in the same sector?"

Forsyth Barr head of research Rob Mercer said some fund managers holding Lion Nathan shares actively or because the company was still in the NZX-50 index would reinvest "a reasonable amount" of what they are paid by Kirin back in New Zealand.

However, he believed there was cash already looking for investment opportunities across the Australian and New Zealand markets.

The Kirin payout to New Zealand shareholders would merely add to that.

Kirin's takeover will need the approval of New Zealand's Overseas Investment Office but that is seen as a formality given its existing 46 per cent stake. Lion Nathan has said the takeover will not affect its plan to build a $250 million brewery at East Tamaki in Auckland.

The company has sold its brewery site in Newmarket.

The deal values Lion Nathan at A$6.5 billion on an equity basis, and A$8.2 billion on an enterprise basis, Lion Nathan said yesterday.

Lion Nathan's brands include XXXX, Tooheys, Boag's, James Squire, Heineken, Beck's and Hahn. It has half of the New Zealand market.

The agreement comes after confidential talks between the two companies since midway through last week.

Kirin's offer of A$12.22 a Lion Nathan share is at a 47.1 per cent premium to Lion Nathan's closing share price of A$8.31 on April 22, the day before it lodged an indicative proposal.

Lion Nathan chairman Geoff Ricketts said the Kirin offer was compelling.

"We believe this is a very attractive outcome for Lion Nathan's non-Kirin shareholders," he said.

Lion Nathan understands it will be an integral part of Kirin's growth strategy in the region, the company said.

Kirin, which owns Australia's largest milk processor and juicemaker, wants to add beers such as Tooheys to offset declining demand in Japan, where sales are forecast to drop almost 1.7 per cent this year.

Lion Nathan shares surged as much as 43 per cent to A$11.84 in Sydney trading yesterday before closing up A$3.26c at A$11.57.

THE DEAL

* Japan's Kirin Holdings has agreed to pay A$3.5 billion for the 54 per cent in Lion Nathan it doesn't already own,

* Shareholders will receive A$11.50 per share from Kirin and a dividend of 72c from Lion Nathan.

* The company's 5829 New Zealand shareholders who own 23 million shares will be paid a total of $359 million.

* The price is a 47 per cent premium to Lion Nathan's market price before the offer was announced on Wednesday last week.