Australia | Oct 19 2006
By Rudi Filapek-Vandyck
It seems like there’s a slim chance Lion Nathan (LNN) shareholders will turn out beneficiaries of the sale process of the Independent Distillers Group in New Zealand.
As has been widely reported, Lion Nathan is very interested in acquiring the private company but one of the problems the company is facing is that it is far from the only one who wants to do so.
As things stand right now, Lion Nathan is believed to be one out of a remaining group of six still vying for the head price, and competition is likely to be fierce with companies such as Foster’s (FGL), Coca-Cola Amatil (CCL) and Diageo believed to be among the remaining five contestants. There is, of course, interest from private equity companies as well.
No wonder thus investors are said to be concerned the company will have to overpay if it wants to remain on top of the competition in this race. The problem with such a scenario is that even if management achieves its goal, but at too high a price, investors are likely to say goodbye to their shares in the company as projected returns will instantly take a hit.
The only way, or so it seems, Lion Nathan can come out a genuine winner is by outbidding the rest without paying too much. The question is whether management is susceptible to such a scenario as Merrill Lynch analysts have been pointing out repeatedly, if Lion Nathan walks away from the auction and allows a new market entrant to buy Independent Distillers this could possibly open up a can of worms in that this could well undermine its current cozy beer duopoly with Foster’s.
Looks like if there ever was a catch 22 situation, this must be the one.
As reported earlier by FN Arena, Independent Distillers appointed UBS to seek a buyer after its founder Michael Erceg died in a helicopter crash in November.
The company was founded 14 years ago. It produces a selection of beer, wine and spirits under its own brands, but is better known via so-called Ready to Drink (RTD) and spirits brands such as Kristov Wodka Cruiser and Woodstock Bourbon.
Lion Nathan shares are essentially back where they were in May this year. They lost 5c, or 0.6%, today to close at $8.24.