Lion bid to block fire sale collapses

By DITA DE BONI liquor writer

A reluctant Lion Nathan will urgently sell a 19 per cent stake in Montana after its legal challenge against the enforced sale came unglued in the High Court yesterday.

The brewer's rival for Montana, British liquor giant Allied Domecq, now seems in the box seat for control of the winemaker.

Lion had launched a string of legal challenges to retain the coveted 19 per cent, which was found to have been bought illegally in February, but must now sell the shares by Friday.

The sale will reduce its stake in Montana to 43 per cent.

It is understood that Lion will not challenge yesterday's ruling, nor will it pursue a substantive case which aimed to prove that the original finding against it was incorrect.

It is thought that Lion will want to spread the sale of the 19 per cent stake as wide and as high as possible, with several institutions already indicating an interest in the stock.

Lion's book build takes the form of a tender for offers, but it is not obliged to accept the highest or any bid.

It would certainly try to cut Allied Domecq out of the action, said one source.

Institutions may be able to pick up the floating shares for a relative bargain given the time constraints placed on the seller, and will find a ready buyer in both Allied and Lion.

High Court Justice Noel Anderson refused to grant the brewer more time to sell off the defaulting stake because Lion had made the request after it had already indicated it would comply with findings of the Stock Exchange's Montana committee.

"[T]he present proceedings are at odds with Lion Nathan's publicly stated intentions ... Lion Nathan argues that unless interim relief is granted it will suffer a loss of more than $30 million.

"If so, it is a loss which follows rulings of the [Market Surveillance Panel's Montana] standing committee which it has said publicly it will conform to," he said.

Justice Anderson also said that as a voluntary participant in the Stock Exchange's regulatory regime, Lion had agreed to abide by rulings of the exchange and was obliged to be open in its dealings and frank in its announcements, which it had not been, leading to unwelcome "shilly-shallying".

He added that, in his opinion, the substantive case Lion had intended to pursue did not have merit.

"I have ... carefully re-examined the decision [of the Montana committee] in the light of counsels' submissions and the relevant listing rules. In my judgment there is every likelihood that on a substantive hearing the rulings would be found to be entirely legally correct."

Lion's Warwick Bryan was yesterday unwilling to comment about the ruling, simply stating that a sell-down would be undertaken "in accordance with the process approved by the New Zealand Stock Exchange".

In contrast, Allied Domecq said it was "very pleased" with the ruling.

Spokeswoman Jane Mussared said Justice Anderson's comments about Lion's motives in doggedly pursuing legal recourse had been "sharp".

Allied still hoped to get to 50 per cent of Montana and had gained some acceptances of its $4.80 a share bid, but she would not go into details.

"Ideally ... Lion Nathan would sell its stake to Allied Domecq for $4.80, which is the best offer out there ... Institutions will have a field day knowing Lion has to get rid of the stake, and Lion will have a hard time explaining to their own shareholders if they accept a lower price for the shares."