Australia: Lion Nathan announces takeover bid for Coopers Brewery

Lion Nathan Ltd announced on September 1 that it intends, through its wholly owned subsidiary, Lion Nathan Australia Pty Ltd, to make an off-market offer for Coopers Brewery Ltd.The Offer is A$260 per share in cash for each class of Coopers shares. The Offer values the ordinary equity in Coopers at A$352 million. The Offer is not subject to a minimum acceptance condition.

The Offer of A$260 per share in cash provides a demonstrably fair price to Coopers shareholders and represents:

-a 478% premium to the price of a buy-back conducted by Coopers of A$45.01 per share in 2003;
-a 416% to 557% premium to the value of Coopers as assessed by the Independent Expert (KPMG) in a report prepared in relation to the buyback conducted by Coopers in 2003;
-a multiple of 19.4 times Coopers’ 30 June 2004 EBITDA(Coopers’ last published accounts), which compares favourably with precedent transactions and sector trading benchmarks; and
-an opportunity for Coopers shareholders to access liquidity and sell some or all of their shares.

Coopers is an unlisted public company based in Regency Park, South Australia. Coopers has approximately 117 shareholders, some of whom have approached Lion Nathan recently with a view to realising fair value for their otherwise illiquid holdings. A Lion Nathan company, the South Australian Brewing Company, owned 19.9% of Coopers prior to 1995.

Rob Murray, Chief Executive Officer of Lion Nathan, said: “This is a very compelling offer for Coopers shareholders. Lion Nathan is hopeful of acquiring a significant shareholding in the Coopers business.”

“We are offering a demonstrably fair price to acquire shares in Coopers and this is a reflection of the very high regard we have for the Cooper family, the brewery’s management and the business and brands they have built.”

"We will be comfortable with a range of shareholding outcomes which is why we have not set a minimum acceptance level. We expect any holding will be a good investment in its own right.”

"Regardless of the outcome, our preference would be for the Cooper family and the management team to continue their close involvement with the business and we would welcome an appropriate Coopers representative on the Board of Lion Nathan, should Lion Nathan be successful in acquiring Coopers.”

Mr Murray continued: “Coopers has a number of quality brands including Coopers Original Pale Ale and Coopers Sparkling Ale. These brands are highly complementary with Lion Nathan's beer brand portfolio which includes Tooheys, XXXX, West End, Hahn, Heineken, Becks and James Squire.”

“Thus, if full ownership were to result from the Offer, Lion Nathan is well placed to continue to drive Coopers’ growth nationally through Lion Nathan's extensive sales and distribution network.”

Coopers has four separate classes of ordinary shares (A, B, C and D classes of ordinary shares). The A, B and D class shares provide the right to appoint directors to the Board of Coopers. The C class shares represent approximately 91% of the economic value of Coopers, but have only limited rights to appoint a director. Lion Nathan is offering A$260 per share irrespective of the class of Coopers share.

Given the absence of a minimum acceptance condition, the success of Lion Nathan's Offer is not dependent on the acceptance of any particular shareholder, or the overall level of acceptances received.

Coopers’ constitution currently includes three tiers of pre-emptive rights, which apply if a Coopers shareholder seeks to sell shares (other than to a relative). Lion Nathan has a third tier pre-emptive right in Coopers.

These rights were granted to Lion Nathan in 1995 in exchange for the 19.9% shareholding of Coopers that Lion Nathan owned following the purchase of the South Australian Brewing Company. These third tier rights entitle Lion Nathan to purchase Coopers shares when shares are offered for sale but not acquired by existing shareholders or the Coopers’ superannuation fund, and are the subject of a court challenge initiated by Coopers. Lion Nathan is also currently in litigation with Coopers in respect of the share buy-back conducted by Coopers in 2003, which did not have regard to Lion Nathan’s third tier pre-emptive rights.

Subsequent to the commencement of Coopers’ litigation against Lion Nathan’s pre-emptive right, Lion Nathan has explored with the Board of Coopers a joint venture and a proposal to acquire 100% of the shares of Coopers (also without a minimum acceptance condition).

Since the recent court proceedings have commenced and been made public, Lion Nathan has received unsolicited approaches from Coopers shareholders seeking to realise liquidity at a fair value for their shares. As an unlisted public company, Coopers shareholders have limited opportunities to sell their shares. As a result of these approaches Lion Nathan has already secured and lodged with the company a transfer notice from a shareholder who wants to sell Coopers shares at A$260 per share, subject to the operation of the pre-emptive regime.

“We are hopeful that the Board of Coopers will recommend acceptance of our Offer to its shareholders. We would also expect its full co-operation in ensuring that Coopers shareholders have the opportunity to consider our proposal,” said Mr Murray.

Lion Nathan's Offer will be subject to the following conditions, which are summarised in further detail in the attachment to this announcement:

-approval under the Foreign Acquisition and Takeovers Act;
-no objection made by any regulatory authority, eg, the Australian Competition and Consumer Commission;
-no material adverse change in relation to Coopers;
-no material acquisitions, disposals or new commitments;
-no material agreement with competitors or change of control provisions;
-confirmation of capital structure;
-Lion Nathan will be provided one Coopers board seat for every 15% of the company acquired;
-appropriate consent from Coopers directors under the company’s constitution; and
-various prescribed occurrences
-Lion Nathan intends to fund cash requirements for the proposed acquisition from existing debt facilities. In the event Lion Nathan acquires Coopers, it is expected the acquisition will be earnings per share (EPS) accretive in the first full year post acquisition.

Further information concerning Lion Nathan’s takeover Offer for Coopers will be contained in Lion Nathan’s Bidder’s Statement, which Lion Nathan expects will be served on Coopers and lodged with the Australian Securities and Investment Commission within the next month. Lion Nathan will send Offers to each class of shareholders.

Lion Nathan is advised by the Caliburn Partnership as financial adviser and Mallesons Stephen Jaques as legal adviser.

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