Montana versus Lion: This time it's personal...

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Montana wines, the largest wine maker in New Zealand and a company highly regarded by many wine experts, has been a target for the brewer, Lion Nathan, for the past year. Lion is part owned by Japan's Kirin Corporation with high profile brands such as Castlemaine XXXX and Steinlager.

But the relationship between Lion's CEO Gordon Cairns and Montana's chairman and major shareholder Peter Masfen appears to have broken down during this period.

For many months Montana has seemed unable to acknowledge that a tie up with Lion could bring benefits and Masfen has repeatedly said that Lion was getting his company on the cheap.

Talking to Masfen continuously left one with the impression that he was struggling to hide his contempt for the Aussie brewer.

This sense of bitterness towards Lion had Cairns shrugging in his Sydney office last November as he told that his beer company could offer distribution and brand skills currently unavailable to Montana.

Masfen stepped up his battle against Lion making a bid to increase his shareholding and control the company outright but most analysts dismissed this as a rather obvious effort to up the price Lion was paying (between $3.20 and $3.80 a share).

Lion slowly built its share to 28.6% of the company and seemed in no hurry to pay more as it gradually hovered up shares in Montana.

But in an attempt to get an even better price sources close to the deal claim Masfen approached Allied Domecq shortly before Christmas.

These sources say that Allied had up until that point shown no interest in Montana and were reluctant to get involved while negotiations with Seagram were on going.

When the Seagram deal fell through it became clear Allied would have to use its war chest and move into wine (having few spirits options left) so the UK company restarted the Masfen talks.

Such is Masfen's perceived dislike for Lion Nathan as a potential partner he is thought to have guaranteed his 19.9% stake to Allied. Indeed rumours circulated on Friday that he had already sold his stake.

Analysts point out that the Brits would never have got involved in a company where two shareholders own nearly 50% unless one was offering to sell up.

The Allied offer appears to be fast and sudden, catching Lion's CEO Cairns off guard while visiting China.

But what is hard to establish is why Masfen should be so anti-Lion. Some close sources to Masfen have suggested that he has an emotional attachment to a company he has dominated for many years. But those involved in the lengthy negotiations between Lion and Montana believe that Masfen just wants more money.

Lion is understood to have made approaches that would have led to higher prices being paid per share but Masfen has effectively rebuffed any attempts to engage him. Sources describe Montana's reaction to Lion as "dismissive".

Peter Masfen did not speak to despite repeated phone calls. But he is not the only one bitter about this battle.

Allied Domecq is fuming that Lion Nathan has been able to exploit the idiosyncratic rules of the New Zealand stock exchange and sweep a huge slice of the company from under its nose - understood to be either 46.8% to 48%.

Lion was allowed to immediately step in and start hawking for stock when normally a two-day stand down is demanded so shareholders can be informed of bidders' intentions. Allied was forced to observe the two day rule.

Both Allied and Montana are muttering darkly that the Stock Exchange is going to have some tough questions to answer and legal action could follow. Montana's share trading was halted on Friday (NZ time) while the debacle is sorted out although it is hard to see how the situation can be reversed.

How did Lion Nathan get away with it? Lion used to be listed in New Zealand and its chairman, Doug Myers, is as close to the Kiwi institutions and Stock Exchange as it is possible to be. At a guess, years of playing golf with the leading lights of business in Auckland may have created a useful dividend when Lion skipped around the rules.

Although this battle for control (of what is really a relatively minor wine company) could take a different turn at any moment it does appear that Lion Nathan has the initiative.

If Lion does gain full control Masfen's future in the company is untenable and even the independent directors will be voluntarily or forcibly rethinking their positions.

But it is Allied Domecq that must be really reeling, particularly after missing out on Seagram. It played its trump card (almost certainly with inside help from Masfen) and still hasn't pulled off the deal. It may be back to the drawing board for Mr Bowman.

David Robertson

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