This week's developments

Discussion of Lion Nathan's failed takeover bid for the independent Cooper's Brewery and links to articles and other discussions.

This week's developments

Postby Oliver » Saturday Nov 19, 2005 9:48 am

Well, it's been a big week in the battle, with the Australian Competition and Consumer Commission saying it had problems with the proposed takeover, and Lion Nathan having two losses in court.

LN is now seeking leave to appeal to the High Court in relation to a ruling by the full bench of the South Australian Supreme Court.

And it seems that analysts are sceptical about whether LN will succeed.

Here are some articles that sum up what happened this week, starting with the court action. The last article is about the ACCC, which was earlier in the week.

Go Cooper's!


Australia's Coopers Scores Legal Victory Against Lion
Friday November 18, 3:19 PM
By Richard Noonan

MELBOURNE (Dow Jones)--Australian brewer Coopers Brewery Ltd. on Friday scored a major victory in its battle to fend off a hostile takeover bid by Lion Nathan Ltd. (LNN.AU) when a Melbourne court moved to allow an extraordinary general meeting of the target's shareholders to proceed.

In a decision that threatens to derail Lion Nathan's A$352 million offer, Federal Court judge Alan Goldberg discharged a temporary injunction against the planned Coopers meeting, subject to agreed undertakings to the company's shareholder documents.

The privately-owned Coopers plans to hold the meeting on Nov. 29 to vote on changes to the company's constitution to remove Lion Nathan's existing pre-emptive rights to buy shares and effectively prevent Lion Nathan from owning Coopers shares.

Justice Goldberg ordered Coopers to provide more information to its shareholders on a valuation from the company's auditor KPMG.

In September, Lion Nathan bid A$260 a share for Coopers. KPMG subsequently valued Coopers shares at A$190 apiece in the absence of the Lion Nathan offer, while independent expert Grant Samuel has put a value on Coopers of between A$284 and A$320 a share.

Ahead of the court decision, some analysts suggested that Lion Nathan is unlikely to secure a stake in Coopers if its pre-emptive rights regime is removed.

"Unless Lion Nathan can stop Coopers from striking out its exemption..., it will not be able to hold any shares," JPMorgan said in a note to clients on Friday.

"Lion Nathan is unlikely to own any shares in our opinion," the broker said.

Meantime, in a separate legal matter related to the takeover, Lion Nathan said Friday it has sought leave to appeal in the High Court to try to overturn an earlier Supreme Court decision related to its pre-emptive rights.

Last month, Coopers successfully applied to cancel a decade-old agreement that gives Lion Nathan a pre-emptive right to buy Coopers shares offered for sale by any shareholder.

Coopers claimed in its lawsuit that Lion Nathan forfeited its pre-emptive right when Japanese brewer Kirin Brewery Co. (KNBWY) acquired a 45% stake in Lion Nathan about six years ago.

Lion Nathan chief Rob Murray said in a statement the company "will continue to pursue all available avenues" to ensure that Coopers shareholders can consider the bid on its merits.

Shares in Lion Nathan closed up 1 cent at A$7.49. The court order was announced after the market closed.

ACCC hops into Lion over takeover
Blair Speedy
November 17, 2005 ... 43,00.html

THE competition regulator has dealt a blow to Lion Nathan's hostile takeover bid for Coopers Brewery, saying it would increase barriers to entry for new beverage players and reduce competition in the beer market.

In a statement of issues released yesterday, the Australian Competition and Consumer Commission said market enquiries suggested Coopers "might be a vigorous and effective competitor" to Lion and rival beverage giant Foster's.

The ACCC noted that discounting by Coopers had led Lion to cut the price of its premium beers in South Australia, while both Lion and Foster's had launched new ale-style beers aimed at luring drinkers away from Coopers' Original Pale Ale.

"More generally, market inquiries suggested that Lion Nathan was seeking to acquire Coopers to neutralise a growing and potentially significant brewer," the regulator said.

But it noted that rivalry between Lion and Foster's "might have a considerably more significant effect on competition in the beer industry", adding that it would seek more information on Coopers's influence before making a final decision next month.

The ACCC also said the acquisition could make it harder for new brewers to enter the market by removing Coopers's distribution network as a potential means to get their product out to market.

"Using either Lion Nathan or (Foster's) to distribute product could be problematic as these companies have an incentive to limit the growth of competing products in order to avoid cannibalising their own sales," the regulator said.

Coopers executive chairman Glenn Cooper said the ACCC comments raised significant questions about Lion's $352 million takeover bid.

"Coopers believes that Lion Nathan has made this bid to remove a competitor that has been hurting its market position."

Lion said it was pleased the ACCC had based its assessment of the impact of the deal on the national beer market rather than individual state-based markets, which could have led to competition hurdles in South Australia.

A successful merger would give Lion the vast bulk of the beer market in South Australia by combining the state's two most popular beer brands, Coopers and West End.

Lion also siezed on comments from accountancy firm KPMG and independent expert Grant Samuel contained in Coopers's target statement to undermine Coopers's proposal to top Lion's $260 per share takeover offer with a share buyback forecast to deliver $314 per share in nine months' time.

Coopers has proposed a buyback of up to 15 per cent of issued stock at $260 per share, to be followed by annual buybacks of up to 5 per cent.

The buyback price would increase in line with annual earnings, which the company has forecast will increase by more than 20 per cent this year, giving a forecast buyback price of $314 a share next year.

Lion chief executive Rob Murray noted the Grant Samuel report warned shareholder acceptances for the buyback could be materially scaled back if holdings exceeded 15 per cent of the stock.

If you want to read analysis of the ACCC statement, there's a Bryan Frith column here: ... 41,00.html
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Postby undercover1 » Tuesday Dec 06, 2005 9:10 am

So, LN get more time to sell the deal/twist arms, while the idea of Coopers being swallowed into the LN/CUB duopoly doesn't raise any competition issues

Coopers takeover vote postponed
Tomorrow's extraordinary general meeting (EGM) to vote on Lion Nathan's takeover bid for Coopers Brewery has been called off until next week. The brewing giant has offered $310 a share. The National Takeovers Panel has ordered the postponement, saying it wants to ensure that Coopers shareholders are properly informed.
Meanwhile, Australia's competition watchdog say it does not view Lion Nathan's takeover as anti-competitive and will not stand in the way of the bid. Graeme Samuel from the Australian Competition and Consumer Commission (ACCC) says Lion Nathan's rivalry with CUB is the main driving force in the market. "Therefore the acquisition by Lion Nathan of the relatively small Coopers brand and Coopers business would not have breached the requirements of the act, which is that there not be a substantial lessening of competition in the market," he said.
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Postby undercover1 » Thursday Dec 08, 2005 9:01 am

Interview with Coopers & LN folk, from the ABC's 7.30 Report

Coopers fights off takeover bid
KERRY O'BRIEN: It's the last of Australia's major brewers still under family control with a devoted following across the country. But Adelaide's historic Coopers Brewery is fighting tooth and nail to fend off a $420 million takeover bid by multinational beer giant Lion Nathan. Two key developments this week seemed to take Lion Nathan a step closer to ownership. Although today, an extraordinary general meeting of shareholders agreed to allow the company to buyback 15 per cent of its own shares. The question is, will Cooper shareholders remain faithful when the crunch comes? The 7:30 Report's finance editor Emma Alberici peers into the froth and bubble.

EMMA ALBERICI: It's a ritual played out at pubs and clubs all over the country. Roll it gently or give it a quick turn before opening - the simple rite of passage to the Coopers cult.

FRANK AKERS, COOPERS CLUB: It's a real loyalty and a genuine love for the beer and a love for the Cooper family, I think, really.

EMMA ALBERICI: Frank Akers is the Coopers Club coordinator keeping in regular contact with its 10,000 members who share a common interest in making and drinking the cloudy ale.

FRANK AKERS: The people who just love drinking the bear, they get together and do what people do when they drink beer. But they are drinking Coopers.

MAN #1: It's a great taste and it's good to have after a long day at work.

WOMAN #1: I went overseas and I found I really missed Coopers pale ale.

EMMA ALBERICI: A key part of the Coopers tradition has to do with the brewery's owners. It was founded by Thomas Cooper in 1862. He had two wives and 19 children who've passed their share holdings down through the generations. In South Australia, the Coopers name is highly revered.

FRANK AKERS: Tim and Glenn, especially, are very much treated like celebrities when they go along to a club night, but they really are genuine people who love to have a beer. They love brewing it and selling it, but they love to get along and have a beer with club members.

TIM COOPER, MANAGING DIRECTOR, COOPER'S BREWERY: We do emphasise that we think that the company's future prospects and the financial performance are best with the family management - the existing family management.

EMMA ALBERICI: Tim Cooper isn't keen to contemplate a life without celebrity, but if a takeover plan for the company goes ahead, he, his half cousins, father and sister could well be out of a job.

TIM COOPER: We would say categorically it's get nothing to do with shoring up the interests of the directors, but it's a matter of looking to the best interests of the shareholders.

ROB MURRAY, CHIEF EXECUTIVE, LION NATHAN: It is true to say there are large factions of the Cooper family that don't want this, but it is important to remember also there are some shareholders we know, who would like to sell to us. So, I guess that's the situation that we're in.

EMMA ALBERICI: It's been three months since Lion Nathan, owner of brands like XXXX, Tooheys and Hahn, launched its $352 million takeover for Coopers, which has since been revised to $420 million. It's been a most extraordinary battle for control of an unlisted public company, whose 117 shareholders have held their shares for so long they had no idea what they were worth. Now with $310 per share on the table, saying 'yes' to Lion Nathan could well make many of them instant millionaires.

DREW CROSSLAND, COOPERS SHAREHOLDER: Never in my wildest dreams did I think they would get to the price that they are now.

EMMA ALBERICI: Drew Crossland has held his shares since the 70s, when his mother, a Cooper, died. Today, he's among a group of shareholders keen to sell and cash in their inheritances.

DREW CROSSLAND: I'm encouraged to sell my share for fair market value to whatever offer is out there. Lion Nathan have put the offer up and that's the only offer I see at the moment that I can find, or I can see, that's fair and reasonable. So, yes, I would accept that offer.

EMMA ALBERICI: The Coopers board told shareholders they couldn't sell until the competition regulator had made a decision about the takeover. This week the ACCC gave the Lion Nathan bid the thumbs up, but the directors are still refusing to budge.

TIM COOPER: We think that the future prospects of the company are great in the current - the hands of the current management - and that, clearly, many of the shareholders are saying to us that they value the association with the company, the heritage, the fact they can trace their lineage back to Thomas Cooper, the founder of the company, and those are the sort of things that they think are important to them.

EMMA ALBERICI: There's something a little odd about a company director recommending shareholders knock back an offer to buy their shares at a price determined by an independent valuer to be fair and reasonable. Under the corporation law, directors are supposed to about in the best interests of shareholders. In a takeover that means extracting the best possible price. Coopers own auditors, KPMG, came to the conclusion that without the Lion Nathan bid, the shares would be worth $190. So it is astonishing that the board is saying $310 a share is not enough, when just last year Tim Cooper himself was buying shares from Coopers shareholders at $45. That's 589 per cent or about six times less than the Lion Nathan bid. Those who sold might be feeling a little ripped off.

TIM COOPER: I don't know about being ripped off, but at the time, $45, nonetheless, did seem quite a big step up to us, as shareholders, from what it had been previously. It was a figure that was arrived at by KPMG when we asked them to do a valuation of shares.

EMMA ALBERICI: Just how independent KPMG is, is up for debate, considering the accounting giant is also the Coopers auditor. You've offered $310 a share, which seems an extraordinary amount of money when you consider that some of the members of the board were paying $45 a share only a year ago, to purchase shares.

ROB MURRAY: That's right. Yeah, it's true. I mean five years ago, they were paying $16 a share. So, it is extraordinary. We believe it's a fair offer, though, for the company.

EMMA ALBERICI: Family members outside the inner circle, like Drew Crossland, are furious about what they see as the inequity of recent share sales to company directors.

DREW CROSSLAND: I don't think it's any coincidence that the directors themselves have been buying up the shares. They've got privileged information of what's going on in the company, and every time shares seem to come on the market, they seem to buy them.

EMMA ALBERICI: In their continuing attempts to kill off the Lion Nathan bid, today directors put an alternative proposal to shareholders at an extraordinary general meeting at head office that media weren't allowed to attend. Directors suggested the company would buy back 15 per cent of the shares at $260 each, for those who wanted to sell. Supporters wore badges that screamed: "It's not about the money". And clearly, it's not, considering directors are offering $50 a share less than the Lion Nathan bid and more than 75 per cent of shareholders voted in favour of it.

MAN #2: We're very impressed with what this board does.

ROB MURRAY: There really is no independent voice, amongst this board of directors, offering those smaller shareholders in Coopers the type of guidance that I think they need.

EMMA ALBERICI: The whole saga could come to an abrupt halt next week when shareholders will be asked to vote again - this time, to change the Coopers constitution, in such a way that would completely scuttle the Lion Nathan offer and never again allow a rival brewer to buy shares in Coopers. The resolution was supposed to be put to shareholders today, but the takeovers panel prevented it from going ahead because it considered that Coopers had sent shareholders information that was materially misleading. They've all now been given extra time to consider if they really want to give up their last chance to sell shares to a competitor.

DREW CROSSLAND: What I would say to other small shareholders is leave the door open, not necessarily for Lion Nathan, but for other people to get a fair price for their shares.

The question is- who is the mysterious "man #1" they quote? Any one here?
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Postby Oliver » Thursday Dec 08, 2005 9:59 am

It's true, as the transcript above says, that more than 75 per cent of the meeting voted in favour of the buyback.

However, what it doesn't say is that, according to today's Age, the vote was to buy back 15 per cent of the company at $260 a share was 1,186,210 shares to zip!

Here's an interesting snippet from The Australian at ... 43,00.html

More than half the shareholders attended the closed meeting wearing badges emblazoned with the slogan: "It's not about the money." Wilton Braund, whose immediate family holds 2500 shares, said shareholders were united.

"If you sell this company it becomes a plaything to be bartered on the international market," Mr Braund said.

Barbara McCarthy, who inherited 25,000 shares, said she would never sell.

"I want them to go to my children and my grand-children and I want the company to grow as it has been," Ms McCarthy said.

And here's some positive news:

Lion's chances poor
By Elizabeth Knight
December 8, 2005 ... 60405.html

WE ARE probably now at the point where it's time to call the clergy to administer the last rites to Lion Nathan's attempt to take over South Australian brewer Coopers. The chance of shareholders knocking back a proposal next week that will kill the Lion Nathan bid are slim indeed.

Yesterday Coopers shareholders voted in favour of the company's undertaking a share buyback at $260 per share. The Lion Nathan bid at $310 per share is a better deal, but the core family interests that control Coopers have a sufficiently tight stranglehold that those wanting to sell their shares to the highest bidder have little chance of exercising this wish.

Yesterday's vote is more about shareholders keeping the option to sell their shares at $260 in the event that Lion's offer never has the opportunity of being accepted, rather than a demonstration that shareholders don't want the takeover offer.

Separately to this, however, the way the numbers are stacked right now, Lion's chances of getting over the line next week are poor.

And this is very unlucky for any of those Coopers shareholders who are not in the inner sanctum - those who would like to be given the opportunity to cash in their shares at the most handsome price going.

At yesterday's meeting various members of the Coopers board wore red badges reading "it's not about the money!" This might resonate for some but not for those that want it or need it. (And tell that to the poor shareholder who sold out last year to those badge-wearing men at $45 per share).

The reason that next week's shareholder vote is important is because the Coopers board wants shareholders to pass a motion that will prohibit Lion Nathan taking a shareholding in Coopers because it is a brewery competitor.

There already exists in Coopers internal statutes a rule that rivals cannot be shareholders - but there is a carve-out for Lion Nathan. Coopers is asking its shareholders to delete that exemption.

It seems antithetical to shareholder interests that the governors of Coopers are able to enact or even retain some self-imposed law that only certain categories of people can become shareholders.

It is a public company (although unlisted). It's like BHP Billiton saying Rio Tinto is not able to take a shareholding. It's like any of us starting a public company and saying only men or red-headed women are able to become shareholders.

So I asked the Australian Securities and Investments Commission about this apparent anomaly.

The response was that there are several examples of public companies - and co-operatives are the prime example - where provisions have been built into the articles of association that allow only certain types of shareholders.

In the case of dairy co-ops the shareholders have to deliver a certain amount of milk each morning.

So Coopers is not alone. These restrictive articles, ASIC tells me, are unworkable in a public company which is listed on the Australian Stock Exchange because "blind" intermediaries who trade stock could not practically police who is buying and selling stock.

This makes sense. But it doesn't address the fact that these restrictive shareholder articles do not afford the minorities appropriate rights.

Indeed, when the management or the board of a company also has control of its register there is a grave risk of channelling too much power into the hand of the corporate governors. As such, the rights of other shareholders can be easily sacrificed.

But as ASIC informed me, there is nothing about any of this behaviour that apparently breaches the corporations law.

The more contestable issue, from a legal perspective, is one which is now part of history. It involves allegations that Coopers directors used company funds to finance part of the payment to buy shares from IEL.

(The way trading shares in Coopers works is that if there is a seller, the existing shareholders have the right to buy shares at a price that is calculated by an independent expert.)

But years ago, when IEL wanted to sell out, it was not happy with the valuation and it is alleged that after some members of the Coopers family bought the shares at the valuation, the company stumped up the rest.

Meanwhile, a little over a year ago, when another parcel of Coopers shares became available, the valuer, KPMG, priced them at $45. Interests associated with the board snapped those up and have made a grand profit - on paper.

There is no doubt that the restrictive articles have enabled some to profit over others. The practice might be acceptable within the letter of the law but not within its spirit.

And it's certainly an issue which is worthy of some additional attention from ASIC.
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