Lion would sell to Allied, if the price was right

By DITA DE BONI

Australasian brewer Lion Nathan has raised the surprise possibility that it would sell its hard-fought stake in Montana Wines to rival bidder Allied Domecq, if the price was right.

From Sydney, Lion's Warwick Bryan said yesterday that Lion would accept an offer for its shareholding from Allied.

But he did not say at what price, adding that its British rival would probably not gain control of Montana from non-Lion sellers because of a lack of available shares.

Allied's "irrevocable promise" to buy any shares at $4.80 each, made last week, is being investigated by the Takeovers Panel, and Allied is barred from acquiring shares until Friday. But Allied has said it also plans to make a formal offer for 100 per cent of Montana under the new code for the same price.

Meanwhile, Lion Nathan must relinquish a 19 per cent stake classed as defaulter securities, and if it decided to sell Allied that 19 per cent as well as its remaining 42 per cent, it could recoup more than $600 million on its total stake.

At its average in-price of $3.67 the company would clear $150 million, which would go straight to Lion's bottom line and could be used to secure other Asia Pacific wine assets.

Both Allied and Lion have expressed interest in the idea of a joint venture, but seem unable to negotiate. Mr Bryan said yesterday: "We're still open to some sort of commercial agreement."

But Allied Domecq firmed up its new offer of $4.80 for 100 per cent of Montana, saying it was most likely to be formalised today. Spokeswoman Jane Mussared said she had not yet investigated Lion's seeming u-turn, but would be discussing the issue with company lawyers if it was true.

Otherwise, she said, Allied was preparing for Friday's meeting of the Takeovers Panel to discuss the company's "irrevocable promise" of last week. Lawyers were "lawyering away on our offer document."

Allied continued to be committed to 100 per cent of Montana and was not concerned about being a locked-in minority, which may happen if Lion Nathan manages to reach 51 per cent with this week's two-tiered offer.

"We've always accepted that might be a risk."

Commenting on the offer by Lion Nathan, in which the brewer proposes to pay $5.50 for an 11 per cent slice of Montana and then $3.70 for the remainder, Ms Mussared said the offers had to be sequential and would take a long time, whereas the Allied bid for 100 per cent at $4.80 was quick and clean.

"They themselves have said their average weighting was $4.38, and ours ... is $4.80."

Local commentators conceded yesterday that the takeovers code had taken a step in the right direction, but still had some way to go to ensuring all shareholders had a fair deal in takeover scenarios.

Shareholders Association leader Bruce Sheppard said it was a shame it had taken no more than one working day to expose the code's weakness.

Anyone with half a brain would not go in for Lion's split-level offer because after they had been scaled back in the $5.50 section of the offer, they would be left as a locked-in minority or have to dispose of the rest of their shares at $3.70.

Independent analyst Hugh Ammundsen said the critical question was whether Lion intended to go to 100 per cent or was happy to stop at 51 per cent, making the $3.70 offer a Clayton's offer.

"What Lion has done is search for a loophole to prevent a direct bidding war for 100 per cent. It certainly doesn't want to go head-to-head on price."

David Jones, deputy chairman of the Takeovers Panel - the body responsible for drafting the new takeovers code - said making a partial bid was not taking advantage of any loophole in the law.

"The code specifically permits partial bids," he said last night. "It is not a loophole, it is what has been provided for by the code. [The Lion bid] is still an offer. It must still be made to all shareholders.

"This is a transparent process for legal control. All shareholders must have the opportunity to share in the premium offered."