23 Nov 2008
Nov. 23 (Bloomberg) -- Lion Nathan Ltd., Australia's second- largest brewer, said it may pull out of a A$7.6 billion ($4.75 billion) takeover offer for Coca-Cola Amatil Ltd. if it becomes "genuinely hostile."
"We're not even remotely thinking this could be done on a hostile basis," Rob Murray, chief executive officer of the Sydney-based company, said on Australian Broadcasting Corp. television today. "If at any stage this becomes genuinely hostile, then we will just go back to our day job."
Buying Coca-Cola Amatil would triple Lion Nathan's Australian sales and make it the nation's biggest beverage maker, with two-thirds of the soft-drink market. Coca-Cola Amatil, backed by Atlanta-based Coca-Cola Co., says the offer has material deficiencies and it won't consider it further.
"I see the board of Lion Nathan being opportunistic with respect to market conditions and they are striking at a time when cash is king," Angus Geddes, chief executive of Fat Prophets, an equity research and fund management company, said today by telephone. Coca-Cola Amatil Managing Director Terry Davis "is going to have to persuade his shareholders that rejecting the offer is in their best interests."
Under the offer, Coca-Cola Amatil investors would receive A$6.15 in cash and 0.469 of a Lion Nathan share for each Coca- Cola Amatil share they own, valuing the latter shares at A$10.35 each, based on the Nov. 21 closing price. Lion Nathan made the offer on Nov. 17.
Increase Offer
"If they can get it at that price then the Lion Nathan shareholders will be the big winners," Geddes said. Still, "normally the first bid is not the last," and Lion Nathan may need to increase its offer, he said.
Murray, 45, and Lion Nathan Chairman Geoff Ricketts would lead the business, which would maintain separate alcoholic and non-alcoholic operations. A combined company may be able to save between A$100 million and A$130 million yearly, Lion Nathan said.
Murray said today he wants to talk with the Coca-Cola Co. and with his takeover target. Coca-Cola owns 30 percent of the Sydney-based Coca-Cola Amatil.
"The Coca-Cola Company are an enormous and significant stakeholder, in this their interests need to be listened to and wherever we can, accommodated," Murray said.
Completing Deal
Completing the deal would return Lion Nathan to the soft- drink market after selling its unprofitable Australian Pepsi bottling division to Cadbury Plc in 2000. The proposal makes strategic sense, Geddes said.
Lion Nathan's controlling shareholder, Kirin Holdings Co., supports the offer and plans to buy A$3.76 billion of new Lion Nathan stock. Tokyo-based Kirin would own 47.5 percent of the combined company after agreeing to buy 327 million new shares at A$11.50 each.
Kirin may discuss Lion Nathan's bid with Coca-Cola if that proves necessary, a company executive said on Nov. 18.
Kirin has spent A$3.5 billion in Australia since December, buying milk producers National Foods and Dairy Farmers and juice- maker Berri. It is taking advantage of the yen, which has surged 68 percent against the Australian dollar since the end of June.
