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Allied Domecq Triumphs in Fight to Buy New Zealand's Montana Wines

Tim Fish
Posted: August 27, 2001

British wine-and-spirits giant Allied Domecq has won the battle over Montana Wines, New Zealand's largest wine producer. Australian brewer Lion Nathan threw in the towel on Friday, Aug. 24, ending a tempestuous nine-month struggle for control.

Lion Nathan will sell its remaining 43 percent stake in Montana to Allied Domecq for NZ$4.80 (currently US$2.10) per share -- or a rough total of NZ$443.5 million (US$194 million). The deal gives Allied Domecq a controlling interest of 70 percent, as the company continues to try to pull together a full takeover of Montana, which it values at about NZ$1 billion (US$438 million).

Combined with the 19 percent of Montana stock it was forced to sell earlier by the New Zealand stock exchange, Lion Nathan expects to see a pretax profit of NZ$127 million (US$55.7 million).

In the end, publicly traded Lion Nathan said Montana had simply become too expensive. "We do not believe that we can create value for our shareholders by bidding over $4.80 for the balance of the company," Lion Nathan CEO Gordon Cairns said in a statement. "However, exiting at this price does create significant value for Lion Nathan shareholders."

Allied Domecq CEO Philip Bowman called the deal a "sensible conclusion." In a statement, he said, "[Montana's] leadership of the New Zealand wine market and its significant export presence make the company a thoroughly desirable acquisition for Allied Domecq."

Montana is the largest exporter of New Zealand wines to the United States, under the Brancott Vineyards, Corbans, Longridge and Stoneleigh labels.

Allied Domecq is one of the largest wine-and-spirits companies in the world, with a portfolio that includes Champagne houses G.H. Mumm, Perrier-Jouët, California's Clos du Bois and Buena Vista wineries, and liquor brands such as Beefeater, Canadian Club, Courvoisier, Kahlua and Maker's Mark.

In the complicated history of the war over Montana, the first battle began last November when Lion Nathan notified the New Zealand Stock Exchange that it wanted to increase its shareholding in the wine company from 28 percent to 51 percent.

Things really heated up in February, when Allied Domecq announced it was making a full takeover bid for Montana, offering NZ$4.40 a share -- a total of about NZ$945 million (US$413 million at the time). Since Lion's CEO is also on the board of directors of Montana, the stock exchange's insider rules allowed Allied Domecq to begin buying stock a day earlier than Lion.

The morning Allied Domecq was set to clinch the deal, Lion announced that it would pay from NZ$4.65 to $4.80 a share for a controlling stake in the company. Hoping to further its advantage, Lion requested a waiver from the stock exchange that would allow it to buy stock immediately. The waiver was granted, and Lion managed to buy 63 percent of Montana, leaving Allied Domecq with 27 percent.

Allied Domecq accused its competitor of unscrupulous trading practices. The stock exchange finally ruled that Lion Nathan had violated New Zealand trading rules, and it ordered the brewer to sell back 19 percent of the Montana shares.

Legal wranglings continued through the summer, until last week, when Lion announced it had had enough.

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Read past reports about the Montana takeover:

  • Aug. 16, 2001
    ">New Zealand's Montana Wines Back in Play Between Two Rivals

  • Feb. 13, 2001
    Allied Domecq Concedes Defeat in Battle for New Zealand's Montana Wines

  • Feb. 12, 2000
    Australian Brewer Appears Victorious in Battle for New Zealand's Montana Wines

  • Feb. 9, 2000
    Two Drinks Groups Battle for New Zealand's Montana Wines

    Read other recent news about Allied Domecq:

  • July 9, 2001
    Allied Domecq Purchases Two Wineries in Argentina

  • June 29, 2001
    Deal Sealed for California's Historic Buena Vista Winery
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