Blog: Chris Brook-CarterAllied vs Hess?

Chris Brook-Carter | 1 September 2003

When I met Warwick Duthy, Allied Domecq's wine business development manager, last month the inevitable subject of acquisitions and in particular Peter Lehmann Wines cropped up. "No News" was the reply. Allied, it seemed, was happy with its 14.5% and had "no burning desire to acquire".
A major rethink may have been prompted in the last few days by the news that the Hess Group has launched a friendly take-over bid for PLW. With its current stake Allied is of course already well positioned to launch a counter offer. And it is a position boosted by what many see as the poor premium Hess is offering PLW shareholders with its $3.50 a share bid.
But, although the majority of commentators feel an Allied bid is inevitable, it is far from cut and dry. An expensive bidding war for an Australian wine company is the last thing Allied needs right now as it continues to convince investors it is on the right strategic track. But the major stumbling block will be the resistance of the Peter Lehmann board to any advance by Allied.
One company executive was openly hostile towards Allied when I spoke to him at Vinexpo earlier this year, and the UK drinks group has done itself no favours on that front with a dogged lack of communication with regards to its intentions, since it began amassing its stake 18 months ago.
Most interesting was a copy of the shareholder letter sent out by founder Peter Lehmann that outlines his reasons for backing the Hess bid, which found itself on my desk today. In it he speaks of the dangers of working for a large corporation. "I worked for a succession of four large corporations," he says.
"In essence, none of these were successful winery owners…they had no concept of the importance of the grower relationship, lacked the human touch for the staff working for the winery and really no workable plan for selling the wine."
He goes on to call the stake held by Allied (although he doesn't name them) as "an undeniable threat" because it has led to speculation that they may decide to gain control of the company. "This could see us in what I would term a creeping stalemate which I do not believe would benefit shareholders," he says.
In the end Allied would no doubt have the muscle to outgun Hess in any bidding war. But the subsequent peace with PLW may be a harder fought campaign.


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