Takeovers panel faces market ire for probe delay

By DITA DE BONI liquor writer

The takeovers panel's investigation into Lion Nathan's latest offer for shares in Montana Group has sparked complaints from a major institutional investor.

Alliance Capital Management, one of New Zealand's largest funds managers, asked in a letter to the Stock Exchange yesterday why the panel had waited almost two weeks after Lion proposed its controversial two-tiered offer to look into it.

The reason for the delay has been obscured by the fact that a senior takeovers panel spokesman told the Business Herald last week that Lion's offer was legitimate under the code.

Lion has offered $5.50 for 11 per cent of Montana to take it to a controlling stake, and will pay $3.70 for any other shares, an offer which has upset both bidding rival Allied Domecq and the standing committee which originally ruled Lion acquired 19 per cent of Montana illegally.

Institutions hoping to exploit competing offers between Allied Domecq and Lion are now stymied until the takeovers panel makes a ruling.

"Global investors are currently seeking to participate in the divestiture of Lion Nathan's 19 per cent [defaulter securities] stake in Montana," the Alliance letter said, adding that the ruling created unnecessary uncertainty.

Lion Nathan has been barred from acquiring shares in Montana until a meeting of the panel - scheduled for Monday - considers the brewer's offer in greater detail.

It is understood that subsequent comments made by Lion, rather than the offer itself, sparked the panel's reaction, causing it to question whether Lion's offer abides by the intent of the new takeovers code, which came into effect on July 1. Although the code permits partial offers, it outlaws differential pricing of a full offer.

But the panel is refusing to comment until after its Monday meeting, even though its decision to examine the offer follows comments from panel deputy chairman David Jones on July 3 that making a two-pronged bid did not flout the new regulations.

"The code specifically permits partial bids ... it is not a loophole, it is what has been provided for by the code ... " Mr Jones told the Business Herald on that day.

A source close to Lion Nathan says the brewer has been watching its public comments carefully since being ruled in default by the standing committee last month.

It had gone through the new offer with a "fine-toothed comb" to ensure it complied with the code.

But that has not stopped the standing committee and the takeovers panel from getting involved.

Yesterday, after the standing committee had met to discuss whether Lion had an implicit or explicit understanding with the buyers of its defaulting shares, it said it would issue its decision on Monday - the same day the takeovers panel meets.

Allied Domecq has had its "irrevocable promise" looked into by the panel and found to be wanting.

And after a long process which found Lion Nathan to be in default of a third of its 63 per cent Montana stake, the brewer has asked the standing committee to look into Montana chairman Peter Masfen's alleged favouritism in the bitter battle.

The continual legal stoushes have caused commentators to speculate that the only clear profits being made from the takeover battle for Montana have been amassed by the law firms involved.