Lion Nathan’s waiver request

Background document

Philippe LeLoir

Secretary, Market Surveillance Panel

From: Paul Oldfield


Subject: NOT FOR PUBLIC RELEASE - CONFIDENTIAL
Date sent: Thu, 8 Feb 2001 12:55:38 +1300

We act for Lion Nathan Enterprises Limited ("Lion Nathan"). Lion Nathan holds approximately 28% of the shares in Montana Group (NZ) Limited ("Montana").

Lion Nathan is an "Insider" of Montana only because the Chief Executive of Lion Nathan Limited is a director of Montana. No other Lion Nathan representatives are on the Montana board.

On 24 November 2000, Lion Nathan gave a restricted transfer notice in respect of Montana. This indicated an intention to purchase up to a further 22% of Montana (to take Lion Nathan's total holding to 51%) at a price in a range of $3.20 to $3.80. The notice allowed for purchases on the market, by private treaty, or by an offer under the Companies Amendment Act 1963. Because Lion Nathan is an Insider, the notice allowed for a 15 business day period before purchases commenced. Under the notice, the period in which purchases may take place is from 15 December 2000 to 1 July 2001.

Montana commissioned an appraisal report in response to Lion Nathan's notice referred to in paragraph 3. This report was obtained from PricewaterhouseCoopers and was released to the market on 12 December 2000. Late yesterday afternoon a subsidiary of Allied Domecq Plc ("Allied") gave a restricted transfer notice. That notice indicates an intention to purchase up to 100% of Montana on the market. The purchase is conditional on:

The independent directors of Montana recommending the Allied offer by 6.00 PM yesterday. The independent directors of Montana have recommended the Allied offer.

Mr Peter Masten and Masten Holdings Limited accepting the Allied offer by 10.00 AM tomorrow 9 February.

Allied receiving acceptances in respect of not less than 50.01% of the shares.

The price indicated in the Allied notice is $4.40. The notice was given under Rule 4.5.5. It indicates that purchases will commence tomorrow 9 February and may continue until 16 February.

Lion Nathan this morning gave a notice increasing the price range under its restricted transfer notice of 24 November (referred to in paragraph 3) to a range of $4.65 to $4.80. Listing Rule 4.5.4(a) provides that if any transferee is an Insider, notice of the change of price must be given at least two business days before the change takes effect. Accordingly, the notice given by Lion Nathan this morning says that the increase in price will take effect on Monday 12 February. Lion Nathan cannot buy in the market at the increased price before Monday 12 February. Allied may buy in the market as from tomorrow 9 February.

Lion Nathan seeks a waiver from the provisions of Listing Rule 4.5.4 to allow the change in price stated in its notice given this morning to take effect as from tomorrow 9 February, and to allow any subsequent change in price to take effect on one business day's notice. The grounds on which this waiver is sought are as follows:

(a) The independent directors of Montana yesterday evening recommended the offer by Allied at a price of $4.40. Accordingly, the independent directors have stated that a price of $4.40 is fair to Montana's shareholders. Lion Nathan proposes to pay at least $4.65. Obviously, the independent directors have the same, or a greater, degree of information about Montana as is held by Lion Nathan.

(b) The market has the advantage of a full appraisal report from PricewaterhouseCoopers provided in December.

(c) Allied can, in terms of Rule 4.5.5, change its price at any time on two hours notice.

(d) To require Lion Nathan to wait until Monday 12 February before buying in the market has the obvious effect that Allied may buy in the market tomorrow without competition. It cannot be in the interests of Montana shareholders to restrict competition for Montana shares.

(e) There is no policy reason in the present circumstances for Lion Nathan being required to give two business days notice of a price increase. The Montana directors do not need a lengthy period to react to, or to comment to shareholders on, Lion Nathan's price increase. The directors have already determined that a price of $4.40 is fair to shareholders.

Obviously, the issue is very urgent. In the circumstances outlined above, that is unavoidable. In order for the waiver sought by Lion Nathan to be effective, a response would, as discussed with you today, be required by 8.30 AM tomorrow 9 February.

If the Panel granted the waiver sought, Lion Nathan would release an announcement to the market that it had obtained the waiver from the Panel, and that the price increase indicated in its notice given this morning would take effect on 9 February.

We are available to discuss the matter or provide any further information at any time. If you wish to discuss the matter please contact myself or in my absence Mr Charles Spillane.

Yours faithfully

RUSSEL McVEAGH

J P H Oldfield

Partner