Lion Nathan bid for Coca-Cola Amatil not dead yet

Posted by Daniel Palmer on 4th February 2009

Lion Nathan’s November offer for Coca-Cola Amatil remains on the table, as talks between The Coca-Cola Company (TCCC) and Lion Nathan’s major shareholder continue.

Coca-Cola Amatil today updated the market as rumours about the proposal continued to swirl, advising that discussions between TCCC and Kirin Holdings – which has a 46% stake in Lion Nathan – continued apace.

The CCA Board told the market on November 17 that it would not progress any further with a review of the $7.6 billion proposal due to a “range of material conditions precedent”. The proposal required the support of CCA’s major shareholder and supplier, The Coca-Cola Company, which was not forthcoming. The deal would include the sale to Lion of TCCC’s 30% shareholding in CCA. Under the proposal TCCC would then hold approximately 8% of the merged entity and have no representation on the merged entity’s Board.

“CCA has been further advised by TCCC that it subsequently provided to Kirin a list of conditions that would need to be satisfied before TCCC would re-consider the proposal,” CCA reported in a statement today.

“CCA is aware that discussions between The Coca-Cola Company and Kirin are continuing,” the Australian Coke bottler said. “CCA is not in a position to judge whether these discussions will result in TCCC agreeing to support the proposal or a varied one, therefore the CCA Board is not presently actively considering the proposal.”

Coca-Cola Amatil had not received any further proposal from Lion, they added, and would “continue to monitor the situation and keep the market informed.”

Rob Murray, Chief Executive of Lion Nathan, indicated in November that Australia’s second largest brewer may try to come to a suitable agreement with TCCC before resuming any discussions with Coca-Cola Amatil.

“This came out in a fairly hasty way that we didn’t particularly want,” Lion Nathan boss Rob Murray admitted in November. “I think therefore that we need to regroup, make sure all stakeholders understand the value. Clearly then, it’s appropriate for some sort of dialogue between Kirin, ourselves and TCCC. I’d love (Coca-Cola) Amatil to be alongside us, but if that is not possible, then I guess, we circle back round with them after that dialogue.”

Reading between the lines, it appears that CCA remains steadfast in their disapproval of any takeover, with the company noting that Kirin is a “significant competitor” to TCCC and CCA in the Australian market for fruit juice and flavoured milk. Perhaps, a gentle reminder to Graeme Samuel and his team at the ACCC. They also reported that the deal now represented just a 4.1% premium to their closing share price yesterday; although their shares have since fallen 5 per cent today.

Coca-Cola Amatil failed to acquire juice maker Berri in 2003 due to the concerns of the competition watchdog and National Foods – a Kirin subsidiary – now owns Berri. As such, the competition regulator may not be keen on the Lion Nathan offer, despite Lion Nathan’s business being kept separate to that of National Foods.

CCA Chief Executive, Terry Davis, has previously outlined his belief that the ACCC might take issue with the proposal and also allayed fears that intellectual property would be made available to a major competitor. “We can’t have a scenario where the major shareholder goes and takes all the intellectual property that we’ve built up over many, many years at CCA and then have it made available – because of the transfer of people, the transfer of business processes and business best practice – to its major competitors,” Mr Davis told The Australian Financial Review in November. “Sure, if they sold Dairy Farmers and they sold Berri, then that would be one of the issues resolved.”

If a deal can be struck it would create an $11b Australian beverage leader. Lion Nathan has the Tooheys, Hahn, XXXX, Heineken and Bacardi brands amongst its range for distribution in Australia. While CCA, sells the Coca-Cola, Mother and Powerade brands, as well as operating fruit and vegetable processor SPC Ardmona.