The independent board of directors for Peter Lehmann Wines said today that they plan to recommend that shareholders of the Barossa Valley winery sell all remaining stocks to the Switzerland-based Hess Group.
The announcement comes one day after competing bidder, British drinks giant Allied Domecq, upped its bid to A$4 (about US$2.77) a share, a total of 103.5 million U.S. dollars, and eliminated all conditions to the offer. However, about an hour after Allied revised its offer, the Hess Group countered with a matching price, also with no conditions.
"Having taken all of these factors into account, the independent directors intend to recommend that, on balance, shareholders accept the Hess offer for all of their shares," wrote board chairman Richard England in a statement released by Peter Lehmann. He added that this advice is "subject to no better offer emerging."
The Hess Group first bid in mid-September for the Australian producer, known for its Shiraz and Cabernet Sauvignon bottlings and a red blend under the name Clancy's, as well as its Chardonnay, Riesling and other varietals.
Allied Domecq, the second largest drinks producer in the world, which owns several brands of spirits, quick service restaurants and wine holdings, (but no wine businesses in Australia), threw its hat into the ring on Sept. 22, offering a higher price of A$3.85 (US$2.66) per share. One day later, the Hess Group matched that offer.
Since then, Australian media reports have painted a picture of an out-and-out purchasing war, with the company's founder and minority shareholder, Peter Lehmann, pitted against the board of directors. Lehmann was reputed to have claimed that he wanted Hess to buy the 600,000-case a year winery he created in the late 70s.
England said the board plans to make their recommendation official on Tuesday, Oct. 14 and asked for shareholders to hold out until then.
However, without any conditions, shareholders will not be obligated to relinquish all of their control during the acquisition. Some shareholders, who may wish to retain a portion of their stock, may do so, as long as Allied or Hess end up with 51 percent of the total shares.
Some of the motivation behind the support for the Swiss group stems from the fact that "Hess has formed a positive relationship with Peter Lehmann Wines management, which may make the transition to their control smoother," England wrote, adding that if Allied won the battle, it would change "distribution arrangements," among other things.
"These factors, and the cost associated with them, may impact negatively on short-term performance and dividends," he wrote.
Hess chairman and chief executive Max Leinhard adds that his company has a better relationship with Peter Lehmann than Allied Domecq because they have the same ideals and the same philosophy.
"We are a family-driven company, and Peter Lehmann is a family-driven company," Leinhard said. "We try to build up an identity, a sense of place, with a winery, not just a facade that gives an impression of identity. If the environment is too big, as with a multinational, identity is lost."
Leinhard also added that Hess originally became interested in Peter Lehmann because of its growth potential in the United States. "We believe we would be the appropriate partner for the American market," he said.
While neither bidder can comment on whether either company will launch a higher bid, under penalty of Australian trade laws, a spokesman for Allied Domecq said Lehmann's support for the competition does not bode well for the British corporation.
"Most shareholders, especially the smaller ones, would usually go with whatever recommendation is made," he said.
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