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Of Bulls & Bears

Friday 19th May 2000

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Wheel turns for Lion

Management fads come and go, and all too often come again. Vertical integration, or controlling every facet of production and distribution of a product, was once the main objective of companies. Then came "right sizing" and a focus on "core competencies." Now these seem to be falling from favour. One company that demonstrates that what goes around comes around is Lion Nathan. In the past 10 years it has been furiously ridding itself of what it saw as non-core assets to focus almost entirely on brewing and marketing beer. Whole chains of hotels were among unwanted assets put up for sale. Now the tide seems to be turning. Under new owners, Japan's Kirin group, and a new managing director, Gordon Cairns, Lion recently announced it was investing in hotels in Australia and this week has shown an interest in wine by bidding for 19.9% of Montana Group. What comes next, Ferdinand wonders, six o'clock closing?

Richina goes down own path

Another company that does not buy into the core-business argument is Richina Pacific, which has just released its annual report. Based in New Zealand, it owns businesses as diverse as venison production, leather tanning, construction and the quaintly named "Blue Zoo International" aquarium company. Not only are its activities diverse but some assets are as far away as China. The company's profile notes that a change of strategy a few years ago saw the company expand internationally, using profits from New Zealand operations to subsidise new operations until they were on their feet. This has not gone entirely to plan as costs are higher and profitability has been lower than expected. The profile indicates the company is not going to fall into line with standard management theory of having a core-business. It believes that from a narrow New Zealand focus the company now has "an orientation without boundaries." Investors are still waiting to see if that turns into "profits without limits."

Force price forced down

Cinema group Force Corporation may have initiated the cancellation of a proposed merger with Internet service company Ihug but investors are not thanking it. The company earlier this month claimed pressure from institutional investors worried about the imploding technology share markets lay behind the termination. This followed a suspension in April of a shareholders' meeting to vote on the deal because of market fluctuations. Since the first sign that the deal was wobbling, Force's share price has fallen nearly 25% to around 46c. From the post-merger announcement euphoria, it is down almost 50%. With the disappearance of around $70 million in market capitalisation, Force will be hoping for another Titanic-like film blockbuster to perk up investors.

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