Lion acts to block Montana takeover

By DITA DE BONI

Brewer Lion Nathan is preparing to boost its stake in Montana Wines to fight off a possible bid from Australian wine conglomerate Southcorp.

Persistent market rumours - confirmed by Lion's notice yesterday that it will lift its shareholding to 25 per cent - suggest that Southcorp is about to enter the bidding for New Zealand's largest wine producer.

Lion claimed that its lightning raid in May for a 19.9 per cent stake in Montana was a "friendly move," made when Foster's and Southcorp were looking at the asset and had apparently been talking to Montana's 21 per cent shareholder and chairman Peter Masfen.

It justified its decision then as protecting its distribution network through Montana's extensive connections with the restaurant trade.

At the time it paid 230c a share, a price Mr Masfen then described as "significantly undervaluing the company."

Lion's latest bid will be pitched between 221c and 265c a share.

Since May, Foster's, Southcorp and BRL Hardy have been expanding their wine interests. BRL Hardy took out the minority interests in Nobilo Wines, while Foster's is tipped to be in the running for DB Group's Corbans Wines.

In Sydney, Lion Nathan spokesman Warwick Bryan said Lion had "no current intention" to action the purchase of the additional 10.7 million shares but was "now free to move" if its existing shareholding was threatened.

Montana's shares closed 7c up at 250c yesterday.

Mr Bryan confirmed that rumours of Southcorp's interest had prompted Lion's move, but said it was possible Montana was still seen as a takeover target.

He refused to say whether Lion would further increase its shareholding.

Mr Masfen said the top of Lion's range still undervalued the company but declined to say what a fair price for the shares would be.

They have traded as low as 201c this year before Lion's move.

Guinness Peat Group director Tony Gibbs would neither confirm nor deny whether the company had been approached for its 7 per stake in Montana.

If Lion acquires the extra 5 per cent within the six months term of the notice it gave yesterday, it will become the largest shareholder.

Combined, Lion, Mr Masfen and GPG will control 53 per cent of the company. But Lion will still be vulnerable unless it takes out those two holdings.

Mr Masfen, who has been holding out for a higher price for some time, admitted that he was surprised by Lion's latest move, saying the two companies were not working in tandem to block Australian interest in Montana. But he declined to state what a fair price would be.

He was not concerned that Lion would now have a bigger bite of the company than he did, saying the issue of who was the biggest shareholder was "irrelevant."

"I would prefer Montana to stay in [New Zealand hands], but that could be more of an emotional observation than a practical one," he said.

"The tragedy is that the New Zealand Stock Exchange is still in the doldrums, so the company is still exposed [as a takeover target]."

Mr Masfen said it was likely that Lion would get board representation soon, but said apart from that, the possibility of Lion's involvement would have little impact on the running of the company.

"I believe Lion has similar views to my own about the company."

He would not say if meetings would now be held between Lion and Montana.

One broker who did not want to be named said the so-called "loose sellers" had been brought out of the Montana share registry now, leaving those holding out for a higher price "which they might get - about 250c is what most people have valued Montana at."