Lion ready to spice up offer for Coopers

SYDNEY - Lion Nathan is considering including some of its shares in its A$352 million ($381 million) cash bid for Coopers Brewery to win investor support, says chief executive Rob Murray.

"It's one of the options we would consider," Murray said yesterday about the bid from Australia's second-largest brewer.

"Some of the shareholders are interested in the ability to invest in a brewing business where there's genuinely some liquidity in the stock."

Murray, 42, wants to buy South Australia-based Coopers to increase sales of higher-priced, more profitable beer brands, which are growing faster than other labels amid falling overall demand and increased competition from Foster's, Australia's biggest brewer.

Closely held Coopers has 117 shareholders, with about 40 per cent of the stock owned by board members and their families.

Lion Nathan is offering to pay investors A$260 a share in cash, compared with the A$45 Coopers paid its shareholders in a stock buyback in 2003.

But Tim Cooper, Coopers' chief executive, said the company wanted to stay independent.

"Certainly, shareholders will be pleased that their shares over the last couple of years have gone up from A$45 to A$260. We'll be pointing out to them that we think in our hands they'll go further."

Coopers is considering various defence options against the bid, including offering to buy back shares from investors or asking shareholders to support a change in its articles of association that would prevent all rivals, including Lion Nathan, from buying stakes in the company.

Cooper said shareholders would "absolutely" support such a provision. Some directors and existing shareholders would also be interested in buying shares at A$260 apiece themselves.

Lion Nathan claims it has the right to buy Coopers shares when they are offered for sale and not acquired by existing investors after its South Australian Brewing unit agreed to exchange its 19.9 per cent stake in Coopers in 1995.

However, on Friday, the Supreme Court of South Australia ruled it no longer had that preference right, a decision Lion Nathan plans to appeal against.

"Given the legal complexities, one of the things that we have to be realistic about is just how long this is going to take," Murray said. "You're looking at a process here that's going to roll for several months."

He said most Coopers shareholders were "in a mild state of shock now that they realise how much this company's really worth, when they compare the A$260 price to the A$45 price that they were offered just two years ago".

Coopers has less than 3 per cent of the national beer market, compared with more than 40 per cent for Lion Nathan.

In its home state of South Australia, Coopers' market share exceeds 20 per cent. A combined company would have about two-thirds of the South Australian market and could require approval from the Australian Competition and Consumer Commission.

"We're certainly in an appropriate level of dialogue with the ACCC," Murray said. "We'll try and show them the wisdom of what we believe is a deal that would meet their criteria."

The bid by Lion Nathan, which is 46 per cent owned by Japan's Kirin Brewery, is also subject to approval under the Foreign Acquisition and Takeovers Act.

- BLOOMBERG