Lion thirsts for every last drop of Montana

By DITA DE BONI

Lion Nathan may yet swoop on the whole of Montana to protect its valuable wine asset from overseas predators.

The transtasman brewer yesterday allowed the Commerce Commission to publicise its application for clearance to acquire all the shares in Montana it does not already have.

Lion Nathan owns 28.2 per cent of New Zealand's largest wine company.

Analysts suggest that it may not be coincidence that Lion Nathan made the move on the same day that Australia's largest wine producer and exporter, Southcorp, divested its Asia-Pacific packaging unit to privately held Visy Industries for more than $A700 million ($900 million).

Having steadily divested its non-core, non-wine assets, Southcorp is now a prime takeover target by global liquor concerns, expected to be either Diageo or Allied Domecq.

And it is thought the "loser" of the two liquor giants will continue foraging in Australasia for valuable portfolio additions.

"What Lion has done in publicising its application is ward off other competitors [for Montana]," said analyst Malcolm Davidson of UBS Warburg. "There's a lot of merger activity worldwide [in this business] at the moment."

Mr Davidson also suggested that Lion had moved towards 100 per cent ownership of Montana before a change in the takeover code early next year which would have compelled Lion to make an offer to all substantial shareholders rather than selected interests.

The Business Herald understands that Lion went to the commission with its Montana application 10 days ago.

Commission spokesman Vincent Cholewa confirmed last night that Lion had agreed that confidentiality should be lifted today, in order that the commission could investigate whether Lion would acquire or strengthen its dominance in any markets.

A ruling on the move is due on Christmas Eve. If Lion does move to take 100 per cent of Montana, it will have just over 50 per cent of the domestic beer market. It will also have the lion's share of wine - Corbans' and Montana's joint share of that market is estimated at around 62 per cent. Montana acquired Corbans from DB this year.



But to acquire the remainder of Montana, Lion will have to buy the 20 per cent holding of Montana chairman Peter Masfen, the second-largest shareholder.



Mr Masfen would not return calls last night, but this month, at the company's annual meeting, he categorically denied any intention to sell out of Montana.

Lion Nathan spokesman Warwick Bryan would not comment on whether Lion had an agreement with Mr Masfen.

He said yesterday's announcement signalled only a "defensive move" by Lion to keep its options open, but he admitted that the company's view on wine assets had changed since its first lightning raid on Montana mid-year.

"We have more interest in the wine industry now - Montana is a very good company and we have signalled we are looking for opportunities to grow outside the existing beer industry."

One analyst, who did not want to be named, saw it differently. "Lion probably realises China is unlikely to work and they are looking to restructure those assets, and Australia and New Zealand brewing certainly isn't moving very fast, so you would expect Lion would have to do something else to fulfil [its] longer term growth objective."

While Montana's share price gained 5c to close at $3.55 yesterday, most brokers the Business Herald spoke to valued the company's shares at around $3.70 to $3.80, picking that Lion Nathan would chip away smaller investors for around $4 a share.

Paul Turnbull of Ord Minnett quoted $3.84, with $4 considered a fair exit price. He said the move was a good one for Lion overall. "It all adds up to a good company."

Mr Davidson of UBS said the move was neutral to Lion but very positive for Montana. "In a way it reiterates Masfen's view all along that the company has been worth more."

While many suspect that Mr Masfen could be taken out at the right price - generally agreed to be about $4.35 - another analyst said Lion would be comfortable with a 75 to 80 per cent stake and "should be able to live with Masfen for a while."