Brewer Lion Nathan, which recently lost out in a bitter bidding war over New Zealand's Montana Wines, is back in action. The company made an unexpected takeover bid for publicly held Australian wine producer Petaluma Ltd., which owns such wineries as Argyle in Oregon and Petaluma, Mitchelton, Knappstein and Stonier's in Australia.
On Tuesday in Australia, Lion Nathan made a cash offer of A$7.00 (US$3.45) for each Petaluma share, for a total of about A$222 million (almost US$110 million). The move follows last week's announcement that the brewer is taking over Banksia Wines, another Australian wine company, for around A$68 million US$34 million).
The offer for Petaluma is 40 percent higher than the wine company's closing price of A$5 per share on Sept. 28, according to the announcement from Lion Nathan, which has breweries in Australia, China and New Zealand. On Tuesday, shares of Petaluma were trading on the Australian stock exchange at A$7.15, which would make the entire company worth about AU$261 million, or US$130 million.
"Petaluma is a leading producer of icon and ultrapremium brands from some of Australia's most prized regions," said Lion Nathan chief executive Gordon Cairns. "We recognize we are offering a substantial premium to acquire this business, and this is a reflection of the very high regard we have for the Petaluma team and the business they have built."
Petaluma shareholders could take up to six weeks to respond to the offer, according to chairman Brian Croser, who founded Petaluma in South Australia in 1976. A group of the original partners owns 32 percent of the shares, including Bollinger of France with 14 percent and Croser with 13 percent. Another 23 percent is held by institutions in Australia and 33 percent by independent shareholders.
"We thought that spreading out the shares would make Petaluma an unpalatable target for a takeover," said Croser by phone from his office at the winery outside Adelaide. "I really didn't expect anybody to come in and lay it on the table."
Croser and the board recommended only that the shareholders consider the offer in absence of a higher bid. "As far as I know, none of the board members has taken a position on whether they personally will sell their shares," Croser added. "This is a good price, but there could be a higher bid."
The Petaluma brand is particularly well-known for its Chardonnay from Piccadilly Valley and Cabernet Sauvignon from Coonawarra, along with Riesling and Shiraz.
Petaluma's interests in the United States include Argyle, an Oregon winery that makes sparkling wines, Chardonnays and Pinot Noirs that Wine Spectator has rated among the state's best. The company also has a joint venture with Washington-based wine group Stimson Lane, owner of Chateau Ste. Michelle and Columbia Crest, to make Bridgewater Mill wines in Australia and market them in the United States. Stimson Lane also imports Petaluma's wines.
One of the conditions in Lion Nathan's bid is that the joint venture with Stimson Lane continue. "If they exercise their right to withdraw from the deal -- if they can -- we can walk away too," said Lion Nathan's director of investor relations, Warwick Bryan. A spokesman for the Washington company said they expect the joint venture would continue as planned.
The bid for Petaluma comes less than a week after Banksia Wines accepted Lion Nathan's bid of 35.5 percent over current share value for the company, which includes St. Hallett, Tatachilla and Hillstowe wineries, all in South Australia.
Lion Nathan seems to be following a strategy similar to that of its rival, Foster's, by investing in wine to offset declining growth in the beer market. Although Lion Nathan recently lost the battle to take over Montana, New Zealand's largest wine producer, it made a profit of NZ$127 million (US$55.7 million) from the sale of its stake in the firm to Allied Domecq, the London-based wine and spirits giant.
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