Lion thwarted as watchdog sniffs a set-up

By DITA DE BONI liquor writer

Lion Nathan has once more been rebuffed at the bargaining table for control of Montana Group, its latest offer found to imply too cosy a relationship between the brewer and buyers of its defaulting securities.

While the takeovers panel assembled to judge Lion's bid tactics, the Market Surveillance Panel's Standing Committee delivered its answer to the same question - a resounding "no."

The committee said the brewer's two-tiered offer did not comply with exchange listing rules or with a previous decision from the committee which found Lion in default.

Although the committee has yet to give details of its decision, it appears Lion's offer threatened to constitute a "contract, arrangement or understanding" with buyers.

Under a previous committee ruling, Lion must sell 19 per cent of Montana - around a third of its holding - judged to have been bought illegally.

However, Lion is prohibited from arranging to buy these defaulting securities back.

Lion's two-tier offer, to buy 11 per cent of Montana at $5.50 and the remainder at $3.70, has been judged to constitute such an arrangement.

But it is not clear whom the committee blames - Lion, or the parties structuring the bid for the faulty offer - because the full decision was not available yesterday.

Lion said it would not comment until the written decision was delivered to the market.

Lion needs only a further 10 per cent of Montana to secure control, but any shares still available are thought to belong to arbitrage players waiting until smoke from the legal saga clears and they can make an accurate comparison between the Allied and Lion offers.

Meanwhile, the Market Surveillance Panel agreed to extend the 30-day period allowed for Lion's sell-down of its 19 per cent of defaulter securities.

The bidding for the prized stake was to begin yesterday, and will now be extended until the standing committee releases its ruling. That date has not been specified.

Independent local analyst Hugh Ammundsen said the committee's decision was understandable in the sense that there was a "chicken and egg" relationship between pricing a bid for the defaulter securities and potentially accepting the following bid.

"One only has to ask the obvious question of how bidders would behave if there was no Lion bid in the market, and if the structure of any such bid was also unknown, and the answer has to be that they would in all probability be influenced by the only other bid ... [Allied's] $4.80.

"Accordingly, Lion would be placed in the tactical position of being forced to respond to the Allied bid, rather than having led ... the standing committee has brought the argument that in trying to link the chicken and the egg, Lion Nathan put the cart before the horse."

The takeovers panel, meeting at the offices of its deputy chairman, David Jones, was last night still discussing whether Lion's bid complied with the takeovers code.