The Australian wine company, Peter Lehmann Wines Ltd, has rejected the takeover offer by Allied Domecq in favour of the lower bid currently on the table from the Swiss company, Hess Group.
Peter Lehmann’s independent directors have recommended the A$143.6m (US$99m) cash offer from Hess even though the current Allied Domecq offer is worth 3.9% more. The company said the Hess offer was less risky.
Allied raised its bid to A$4.00 a share on Thursday, conditional on gaining 51% of the shares, while Hess has offered A$3.85 with no conditions.
However, the company’s independent directors have advised shareholders not to sell until nearer the offer deadline of October 24 in case Allied changes its conditions or a higher bid emerges.
“While the independent directors acknowledge that Allied is offering a 15 cents, or 3.9%, premium to the Hess offer, they believe this is insufficient to compensate for the uncertainty and risk created by Allied’s conditions,” said chairman Richard England in a letter to shareholders.
“A bird in the hand rather than two in the bush,” was the explanation offered by England later. He added that while it was unusual to recommend a lower offer in a takeover battle, the higher bid had so many conditions attached to it.
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“Hess will take all shares at A$3.85 and pay for them within five days,” he said.
Local market wine analyst Stavros Elia said the bids were not directly comparable, the decision was justifiable and the unconditional Hess bid was significantly more attractive at present.
Allied Domecq said it was disappointed with the board’s decision and found it curious that the higher offer was not being recommended but it said it was comfortable with its bid at the current time.
