Inquest slams Lion's motive for complaint

By KARYN SCHERER

Brewer Lion Nathan has admitted trying to cut a deal with its bitter rival, British liquor giant Allied Domecq, over the distribution of well-known brands of spirits in New Zealand.

Lion Nathan's Sydney-based chief executive, Gordon Cairns, said yesterday that the two companies had a "number of conversations" in which they tried to reach a commercial settlement.

However, he rejected allegations that Lion had offered to drop legal action against Allied in return for a deal, describing the statements as "mischievous".

The allegations were revealed in a strongly worded decision by the Stock Exchange committee considering a complaint laid by Lion that Allied had breached listing rules in its takeover of Montana.

The committee - Bill Wilson, QC, retired Court of Appeal judge Sir Duncan McMullin and retired High Court judge Sir Ian Barker - announced last week that it had decided to dismiss the complaint because it had been overtaken by events.

In its written decision, the committee says it believes one of Lion's motives in making the complaint was to try to cut a deal with Allied.

Statutory declarations given to the committee said two Sydney-based investment bankers met last month to talk about what was described as a "previously discussed deal" between Lion and Allied.

The meeting was called by Lion Nathan's representative, Rob Rorrison from Macquarie Bank.

Allied Domecq's representative, Goldman Sachs executive director Mark Fleming, said Mr Rorrison made it clear Lion "would be willing to drop the case if Allied Domecq would do the deal previously discussed".

Mr Fleming claims the deal was over two of Allied's spirits brands.

The committee does not name the brands, although they are understood to be Seager's gin and Black Heart rum.

Black Heart rum is the second or third biggest selling rum in New Zealand and Seager's is the third most popular gin.

Both brands are owned by Allied Domecq and are made under licence and distributed in New Zealand by Lion.

Lion, which controls most leading brands of spirits in New Zealand through its subsidiary New Zealand Wines and Spirits, is believed to have been keen to buy the trademarks for the brands or secure a long-term distribution deal.

Mr Fleming told the committee Allied's chief executive, Philip Bowman, told him he was not "going to be blackmailed" or do any deal while Lion "held a gun to his head".

The committee admits it could not form a "firm view" of the allegations, but says it believes Lion was "motivated by a desire to wrest from Allied Domecq some commercial advantage which might offer it some solatium for the loss of a takeover battle from which it chose to disengage".

It also suggests Lion may have had another purpose - to obtain information which might bolster a possible complaint to the Takeovers Panel.

Mr Cairns told the Business Herald yesterday that he accepted the committee's decision to dismiss Lion's complaint.

He said it was "worse than strange" the committee had decided to include details of the "private meeting" between the two brokers in its decision, and said his views were "unprintable" on the matter.

However, he did not deny the meeting took place, and defended the actions of Mr Rorrison, who he said had been instructed to reach a commercial settlement.

Mr Cairns said a "number of conversations" had taken place throughout the takeover battle in which Allied's ownership of and distribution rights for its brands in New Zealand had been discussed.

Asked whether Black Heart rum and Seager's gin had been specifically discussed, Mr Cairns said it was "not appropriate" to go into details.

"The objective throughout the proceedings had been to reach a commercial settlement with Allied," he said. "I would have thought the Stock Exchange would like to encourage that."

He said he stood by the principle, "but to suggest that we would use that as leverage is a ridiculous assertion".

Allied spokeswoman Jane Mussared said the company was "obviously very pleased" the case had been dismissed.

It supported the committee's report, including claims that Lion had an ulterior motive.

"We believe that everything the committee said was true," Ms Mussared said.

The decision reveals the shares in dispute comprised only 6.3 per cent of Montana, not the 9.9 per cent originally stated by Lion. Even if Allied had been forced to give up the stake, it would hold more than 90 per cent of Montana, giving it the right to compulsorily acquire the rest.

The committee is also damning of Lion's assertions that it would like to have maintained a minority interest in Montana.

Lion would "at best be a locked-in minority shareholding in an unlisted company", it says.

Its assertions therefore "lack credibility and are totally inconsistent with its conduct and public statements to date".