In a feud bitter enough to rival the Hatfields and McCoys, two multinational beverage companies are once again battling for control of Montana Wines, New Zealand's biggest wine producer.
Since February, rival bidders Australian brewer Lion Nathan and British wine-and-spirits giant Allied Domecq have been embroiled in controversy over the attempted takeover of Montana, with Allied accusing Lion Nathan of violating New Zealand's stock purchasing rules.
The end result is that Lion Nathan, which had acquired a controlling 63 percent stake in Montana, was forced to sell off more than 40 million shares on Aug. 15. It now has only 44 percent ownership of the wine producer, giving Allied Domecq a new opportunity to take over the company.
"Allied Domecq has a full offer for Montana in place, at NZ$4.80 [US$2.90] per share," said Anthony Cardew, spokesman for London-based Allied Domecq. Montana's independent directors have recommended the Allied Domecq bid to shareholders.
"If you have followed the contortions of the New Zealand Stock Exchange over the last few months ... you will see that Lion Nathan will have to make a bid [for a majority stake] if they wish to repurchase their shares," Cardew explained. "That, at least, is the educated opinion of the U.S. and British share markets, although one would not be surprised to see a further convolution from Down Under."
The spoils in this roughly NZ$1 billion fight is the largest exporter of New Zealand wines to the United States, under the Brancott Vineyards, Corbans, Longridge and Stoneleigh labels.
In the complicated history of the war over Montana, the first battle began last Nov. 24 when Lion Nathan notified the New Zealand Stock Exchange that it wished to increase its shareholding from 28 percent to 51 percent. It helps to know that Lion CEO Gordon Cairns is also on the board of directors of Montana.
Before Lion could begin buying up shares, Montana's independent directors advised shareholders not to sell, saying that Lion's offer of NZ$3.20 to $3.80 a share was too low.
Things heated up again 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). Time seemed to be on Allied Domecq's side. Since Lion's CEO was on Montana's board, 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. Many stockholders balked at Allied Domecq's price, although Lion's deal left out many smaller players.
Hoping to further its advantage, Lion requested a waiver from the stock exchange that would allow it to immediately buy stock. The waiver was granted. Lion was able to buy a 63 percent share of Montana, leaving Allied Domecq with 27 percent.
Allied Domecq cried foul. It accused Lion's representatives of unscrupulous trading practices, such as not giving sufficient notice of their takeover plan -- a move required by New Zealand trading laws -- and of contacting stockholders before the waiver was granted, essentially lining up deals ahead of time. The stock exchange established a committee, or takeovers panel, to handle the inquiry into the sale.
While waiting for resolution of its complaints, Allied Domecq moved on to other acquisitions. In June, it bought the historic Buena Vista Winery in Sonoma County, and only a week later, it purchased two Argentina wineries: Bodegas y Viñedos Santiago Graffigna and Viñedos y Bodegas Sainte Sylvie.
Then at the end of June, the takeovers panel determined that Lion Nathan had violated New Zealand trading rules, and it ordered the brewer to sell back 19 percent of the Montana shares, although Allied Domecq had asked for all the shares to be forfeited.
The panel set the deadline for Friday, Aug. 17. On Wednesday, Lion Nathan sold the required stake in Montana, at NZ$4.65 ($2.02) a share, close to the price it originally paid in February. (Allied Domecq is once again asking for an investigation into Lion's trading practices, as Montana's stock had been trading at NZ$4.35 the day before.)
According to the committee's ruling, only third-party private investors and investment companies could buy those shares. Lion Nathan must wait one trading day after it receives payment before attempting to buy back a controlling interest.
"We get paid tomorrow for our shares, but we haven't indicated if we will attempted to purchase more on Monday," said Lion Nathan's investor relations director, Warwick Bryan. "According to the new takeover code, which the standing committee established in late June, [a company] has to be able to purchase more than 50 percent of a company in order to acquire it, otherwise they can't make the purchases."
"Allied's problem is that they own 26 percent and it will be difficult for them to get the remaining 24 [for a majority stake], even though we sold 19 percent," Bryan added.
Market analysts say the independent shareholders who now own the other 19 percent may hold out to see which company makes the highest offer.
"That's what makes the most sense, doesn't it?" said a London-based associate for Standard & Poor's, who wished to remain anonymous. The firm provides analyses of global equities, risk management and market developments for its clients, one of which is Allied Domecq. "The beauty of this game is that it's difficult to say what will happen. It has been a long-running battle, and it's far from certain at this point who will get this company."
Read past reports about the Montana takeover:
Read other recent news about Allied Domecq: