Lion's sights on new wine target

By DITA DE BONI liquor writer

Lion Nathan, fresh from defeat in the sharemarket battle for Montana, has gone fossicking in Australia and found an alternative undervalued wine target.

The brewer said yesterday it would make a takeover offer for all the shares in South Australian company Banksia Wines, which has been trading at a discount to its listing price for most of its 11 months on the Australian Stock Exchange.

Banksia, formed in the middle of last year from the merger of St Hallett in the Barossa Valley and Tatachilla at McLaren Vale, would cost Lion just over $A87 million in cash and assumed debt.

The brewer will offer $A1.152 a share for the Banksia stock - comprising $A1.12 in cash for each share plus a fully franked dividend of 3.2Ac a share from Banksia - for the 61.1 million shares in the company.

Lion will also offer 27Ac for 3.15 million options in the wine maker.

The offer represents a premium of almost 20 per cent over the stock's last price of 94Ac on Wednesday before trading in it was halted, and a 51.6 per cent premium on the three-month average share price of 76Ac.

Lion chief executive Gordon Cairns said yesterday that Banksia, "with its well-respected brand portfolio, highly regarded winemakers and experienced management team, represents an important first step in gaining exposure to the Australian wine sector". But he did not elaborate on why a substantial premium was offered.

Lion has already bought 14.9 per cent of shares in Banksia from the company's chairman and executive director, and has an undertaking to acquire a further 5 per cent from the pair.

The Banksia board recommended shareholders accept the offer as soon as possible.

But the acquisition leaves an interesting quandary for Lion, as former takeover target Montana - now a division of Allied Domecq - is responsible for distributing Tatachilla and St Hallett products in New Zealand.

Banksia listed on the Australian Stock Exchange in November last year to a good reception from investors. It was fully allocated only hours after its prospectus was lodged.

But its stock dipped in value as British market conditions changed and lower margins were made in the merchant trade.

Banksia subsequently reduced its maiden profit forecast from $27 million to $2.4 million in the year to June.

The company, which sells about 330,000 cases of wine annually and makes bulk wine under contract, generated revenue of $31.2 million last year.