Rush begins for Montana

By DITA DE BONI liquor writer

A frantic dash by Allied Domecq and Lion Nathan to the 51 per cent mark on Montana Group's share registry was signalled yesterday as Lion lost almost a third of its holding in the company.

The committee deciding the brewer's punishment for illegally buying Montana shares ruled that Lion must sell 19 per cent of Montana.

Lion, which had just over 62 per cent of the firm, is suddenly back to 43 per cent and scrambling for control.

Allied Domecq, with 27 per cent, moved immediately, "irrevocably" promising to buy up to 50.08 million shares, or 23 per cent of Montana, for $4.80 a share.

The promise is intended to immunise the company against the Takeovers Code, which comes into force tomorrow, allowing Allied to continue buying shares next week.

Lion, meanwhile, traded aggressively, picking up a fraction more of the winemaker by the end of trade.

Montana shares gained 23c to close at $5.05.

From tomorrow, both parties must make any offer for shares in the company to all shareholders, as opposed to building stakes in increments.

Lion said it was "extremely disappointed" with the decision of the Stock Exchange market surveillance panel standing committee and is understood to be considering a judicial review.

The decision means Lion Nathan must sell about $200 million worth of Montana shares to a non-related party.

It is also prohibited from entering into any agreement, formal or otherwise, to buy back the shares. But there is no prohibition on Lion ultimately buying the stake.

Another possibility is the auction of the shares by Montana Group.

Emerging from a lengthy board meeting yesterday, Lion spokesman Warwick Bryan said the company had not made a decision about its course of action, and would not comment on any plans considered.

Allied spokeswoman Jane Mussared said Lion should have been made to forfeit its entire stake, but her firm was "pleased the committee had ruled and clearly exercised [its] discretion."

Yesterday's 13-page decision from the standing committee - retired High Court judge Sir Ian Barker, retired Court of Appeal judge Sir Duncan McMullin and Bill Wilson, QC - described Lion's entire shareholding of 62.49 per cent in Montana as defaulter securities, but "mitigating circumstances" meant Lion would not forfeit everything.

The first circumstance was the culpability of Lion Nathan's broker, Credit Suisse First Boston. The committee says the breach was "due to the actions of [Lion's] agent CSFB, not Lion Nathan itself," but noted that Lion did not seek to distance itself from the broker.

CSFB has constantly refused to comment on its central role.

Other mitigating circumstances included the fact that "no loss resulted to the selling [Montana] shareholders, all of whom were well-informed investors," and that Lion had "already suffered through reputation loss, the inability to take control of Montana, and being largely responsible for the costs of the inquiry."

The committee also pointed out that Allied Domecq could have either bought, or said it would buy, shares in Montana at the time in question and did not.

The 19.97 per cent Lion Nathan is required to relinquish is the 9.97 per cent strictly ruled to have been bought before the midnight starter's gun on February 8, plus a further 10 per cent acquired by Lion Nathan Group Ventures, which the committee "suspects ... was acquired ... as insurance against the first decision [being] unfavourable to Lion Nathan and [resulting] in Lion Nathan being required to divest itself of the 9.97 per cent acquired in the transactions ... reviewed at that hearing."

The brewer has one month to sell.

Macquarie senior investment analyst Arthur Lim said he would not be surprised if Lion Nathan and Allied Domecq came to an agreement to jointly run Montana.