As Lion Nathan reveals profit growths of 16% in its half year results, CEO Gordon Cairns talks to about the on-going fight for New Zealand's Montana Wines and his growing disappointment at the turn of events. David Robertson reports.

Relationships between the partners in Montana Wine's love triangle have hit a new low with chairman Peter Masfen selling out to Allied Domecq. Lion Nathan, the Sydney-based brewer, has a 62% stake in Montana but it will not know until mid June if it has won control because of an investigation into its share dealings by the New Zealand Stock Exchange.

In the meantime Allied, Lion's rival suitor, has been increasing its shareholding and bought the major part of chairman Peter Masfen's holding, taking its total stake to 26.7%.
Lion chief executive officer Gordon Cairns told just-drinks at a results press conference in Sydney yesterday that he was very disappointed in this latest turn of events. He has called on Masfen to step down from the Montana board and accused the New Zealander of ignoring minority shareholders and serving his own interests.

Cairns is also becoming increasingly annoyed by Allied's behavior. When Lion and Allied initially clashed Cairns called Allied chief executive Philip Bowman and offered to do a joint venture (they already have a partnership in New Zealand as Lion distributes Allied's spirits).

Bowman said no but just last week Allied's agents were on the phone suggesting the partnership was still possible. "I said sure lets get together and talk but the next thing they do is buy Peter Masfen's share. I don't know what they are doing," says Cairns.

Cairns says that Masfen was trying to auction off his share in the company but Lion were not interested. Masfen has sold his stake for NZ$4.80 a share - significantly above the average NZ$3.69 a share Lion has paid for its stake.

"He [Masfen] has sold his share, I think the appropriate thing is for him to resign," adds Cairns. Masfen had originally attacked Lion for only wanting a 51% controlling stake in Montana claiming this meant the value of minority share holdings were reduced.

Cairns fired back at Masfen yesterday saying: "He has clearly abandoned the minority shareholders in his own self interest."

The Montana debacle threatened to obscure Cairns' pleasure in revealing a 16% growth in profits to A$89m for the six months to the end of March.

This profit growth came despite Australia's economic wobbles, the excise rate on beer doubling and a contraction in the beer market. Cairns said these factors had cost Lion A$10m (US$5.2m) and another A$10m could be put down to the weak Australian currency, higher than expected inflation and a poor summer hitting barley crops.

Market share also increased in the vital East Coast market - which represents 80% of the Australian total. Cairns could not hide a slight smirk as he said Lion now held over 42% of market share while Fosters had fallen below 55%.

But the company's Chinese operations continue to be a problem and Lion is looking to either ditch it or reduce capacity with a partnership with a domestic brewer.