Lion pounced too soon, says Montana

By ELLEN READ

The investigation into Lion Nathan's acquisition of a controlling stake in Montana looks set to hinge on two questions - exactly what constitutes a transaction, and whether brokers are acting for sellers or buyers in arranging deals.

Montana - on behalf of its minority shareholder Allied Domecq - has asked the stock exchange market surveillance panel to appoint a committee to investigate Lion's recent share purchases.

This month, Allied's offer of $4.40 a share for a full takeover was trumped by Lion's counter-offer of $4.65 for a 50.1 per cent stake.

Lion's bid was fast-tracked when the market surveillance panel granted it a waiver from normal takeover rules.

Montana alleges Lion breached stock exchange listing rules by obtaining agreements from institutions to sell their Montana shares on Thursday, February 8, despite the waiver not allowing Lion to start buying until the next day.

The surveillance panel discussed the investigation with Montana yesterday, but no details had been released last night.

The letter from Montana's lawyers, Bell Gully, to the panel, obtained by the Business Herald, requested that Sir Duncan McMullin, Sir Ian Barker and/or Bill Wilson be on the investigating committee.

One key issue will be whether Credit Suisse First Boston was acting on behalf of the seller or the buyer, Lion Nathan, when it approached institutions on February 8 asking them to sell Montana shares.

Montana asserts that Credit Suisse was Lion's agents but Lion says the broker was not acting on its behalf until 2.15 am the next day.

To help decide, Montana wants Credit Suisse's tapes of its discussions with shareholders investigated.

The other issue is at what point are the share transfers deemed a transaction - when they were agreed to (before midnight), or when they were processed (after midnight). Montana's letter maintains that it was before midnight.

No decision has been made on what portion of its Montana holding Lion may have to forfeit if it has breached listing rules.

"I think that would probably be something that the standing committee would be considering," exchange surveillance executive Tanya Irving said yesterday. "It's not entirely clear in the rules."

She said the options included forfeiture of Lion's entire stake, some or all of the increased holding it acquired off market on February 8, and/or the remaining stake it bought on market on February 12.

Stock exchange managing director Bill Foster said he could not comment on the investigation's scope or time frame, saying it was a matter for the panel.

He said Lion could not be made to forfeit any shares it held before the restricted transfer notice was filed - that is, the 28 per cent stake it held.

The argument would hinge on the nature of the approach made by Credit Suisse to the institutions on the Thursday night, said Mr Foster.

"There's nothing under the rules that says you can't talk to people about whether they might be interested in selling their stock to you. But you cannot complete a binding contract before the notice period expires. That is, people must be free to back away before the notice period expires."

If Credit Suisse had approached people on Thursday and got agreement but not completed the deal until after midnight, that would be legitimate, he said.

"Whereas if they'd signed them up before that time then arguably that would be a breach of the terms." Credit Suisse managing director Bill Trotter declined to comment.

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