Lion roars over cost of Montana default

By Phil Boeyen, ShareChat Business News Editor

Friday 29th June 2001

Brewer Lion Nathan (NZSE: LNN) says an order to sell 19% of its holding in Montana (NZSE: MON) as the penalty for breaching NZSE listing rules is manifestly unjust.

Both Lion and Montana had agreed to let the Standing Committee decide how many Montana shares should be sold, after the committee found the brewer in default in its February raid, following a complaint from Allied Domecq.

The Standing Committee says the brewer has one month to complete the sale, which must be to a party or parties independent of Lion Nathan. The sale will reduce Lion's holding to 43.5% from its current 62.5% majority. Allied Domecq has just under 27%.

Montana has yet to comment on the decision but Lion Nathan CEO, Gordon Cairns, has been quick to condemn it.

"We are extremely disappointed in the Standing Committee's decision to impose a severe penalty (instead on an appropriate remedy) on for what was, at worst, a technical breach of the Stock Exchange Rules.

"We believe that the decision that we should dispose of 40 million shares worth around $200 million is manifestly unjust, given that we acted in good faith throughout and the initial finding of the standing Committee covered only 21 million shares."

Lion says it is now considering its options, bearing in mind the best interests on Montana and its shareholders.

"Whatever the final outcome, we believe Montana is a very good business with an exciting future," says Mr Cairns.

Although Lion is unhappy with the decision, both Allied and Montana had been demanding an even harsher penalty, claiming the company should be ordered to sell more than 40% of its stake.

In its decision the Standing Committee says it has exercised its discretion after weighing a number of rulings and legal precedents, and that the 19% penalty represents part of the shares that Lion acquired in February.

"The market will decide whether Lion Nathan, after selling the shares, is able to acquire again a majority interest," the Committee says.

Because of the new takeovers code which comes into effect on Monday, if Lion wants to push its stake above the 50% mark it will have to make the offer to all shareholders.

Montana shares jumped 23 cents to $5.05 in afternoon trading following the ruling while Lion Nathan fell 10 cents to $5.40.

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