The battle for control of New Zealand's Montana wine group has barely begun and already the mud is being thrown.

Last month PriceWaterhouseCoopers released a report, commissioned by Montana's independent directors, evaluating a fair price for the company - the biggest wine operation in New Zealand and a significant new world exporter.

Both Lion Nathan, which owns 28% of Montana,and its chairman Peter Masfen, who owns 19.5%, want to increase their stakes.

PriceWaterhouse believes that between $4.16 and $4.64 a share is fair value. But both Lion and Masfen are currently talking of bids between $3.20 and $3.80 (the actual share price is hovering below the $4 mark).

"Both want an increased stake and the bitching over valuations is likely to be merely the start of hostilities."

Some analysts also believe the PriceWaterhouse figures are over the top. According to recent reports ABN Amro is looking at $3.55 to $4 and Salomon Smith Barney $3.20.

The discrepancy has been used by Lion as an indication that the PriceWaterhouse report is wrong and should be rejected but deputy chairman Barry Neville-White, who heads the independent directors, is sticking with the accountants.

"We support the report. These other analysts are taking a selective view and we have had a number of institutional investors support it as well," he told

But of greater concern is the damage the battle between Lion Nathan and Masfen could cause long term. Masfen, talking to in the past, has not tried to hide his unhappiness at Lion increasing its stake for what he sees as a cheap price. And Lion CEO Gordon Cairns didn't mince his words telling last month that Montana's future was with his company.

Lion CEO
Gordon Cairns

The unfortunate situation is that the major shareholder and hope for the future is now competing with the chairman and second biggest shareholder. Both want an increased stake and the bitching over valuations is likely to be merely the start of hostilities.

"It is my role to make sure that doesn't happen," says Neville-White of a potential conflict between Masfen and Lion Nathan.

But the deputy chairman is giving nothing away as to whom he supports: "Lion is a good company and very well managed. But they have not put any firm plans on the table [as to why Montana is better with Lion]. Peter has a genuine desire not to let the minority shareholders be subjected to a majority without seeing full value."

Peter Masfen and his family have run Montana for years and it appears that this spat between him and Lion is largely about keeping the family business - or at least not selling it off on the cheap. But Lion Nathan must win for Montana to realise its potential - a fact that will surely not have been missed by its directors.