By Phil Boeyen, ShareChat Business News Editor
Wednesday 25th July 2001
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The decision not to proceed with the offer comes in the wake of publication of reasons for the Montana Standing Committee's decision last week, which found fault with the context in which Lion was proposing to selldown a 19% stake of Montana shares.
Lion must divest the stake as a penalty for breaching NZSE listing rules in February.
In its published decision the Standing Committee says Lion's plan to offer $5.50 for 11% of Montana to take it above 50%, then to offer $3.80 for the rest of the company, is linked to the selldown.
"However it is presented Lion Nathan's takeover proposal of 1 July 2001 links the purchase of the remaining Montana shares not already held by Lion Nathan with the selldown of the defaulter's shares in such a way that the bait for the selldown is the ability of the purchaser to take advantage of the attractive exit offer of $5.50 per share."
"It (the Standing Committee) is of the view that the initial selldown of the 19% defaulted stake at figures likely to be no more than $4.00 per share and the firm offer to buy 11% back at $5.50 per share, although not made with specific parties, was a clear indication to the institutional investors to whom it was made that their purchase of shares in the selldown would be rewarded by a selling price of $5.50 per share."
The committee goes on to say that the announcement of the selldown arrangement and the purchase of the 11% at $5.50 did amount to "an arrangement or understanding" which would come into effect when the two transactions were completed.
Such an arrangement is not permitted under NZSE rules and was reiterated in the committee's earlier default decision against Lion Nathan.
The Committee says the link between the sale of the defaulted shares and the offer to buy is such that, in reality, the purchasers do have the right to sell back the shares.
"This is in substance a put option."
The Committee's decision also gave the details surrounding the proposed selldown of Lion's 19% stake, which had been organised by Macquarie Bank.
It shows that by July 12 a total of 23 institutions had submitted bids for the default stake, with the majority of bids in the range between $3.70 and $3.90 per share.
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