Lion takes majority stake in Petaluma


Consolidation is a consistent theme among global beverage groups

By CNN's Geoff Hiscock, Asia business editor

SYDNEY, Australia (CNN) -- Australasian brewer Lion Nathan has won a majority stake in its takeover target, Australian premium winemaker Petaluma.

Lion said Tuesday it had acquired just over 16.1 million shares or 50.7 percent of Petaluma.

On Monday it lifted its takeover offer from Aust.$7.00 ($3.57) to A$7.27, valuing the Adelaide-based winemaker at about A$229 million ($117 million).

Petaluma, one of the most prestigious brands in Australia, also controls the Michelton and Knappstein labels and has a joint venture in wine production and distribution with U.S.-based Stimson Lanes.

Lion is the second-largest brewing group in Australia, behind Foster's Group, and the largest in New Zealand. It also has a brewing operation in China, which it plans to quit.

The Petaluma board had unanimously recommended acceptance of Lion's bid.

Shares in Lion, which is 46 percent held by Japan's Kirin Brewery, were d down 2.2 percent Tuesday, closing 9 cents lower at A$4.30.

Lost bidding duel for Montana

Lion's successful bid for Petaluma comes after it lost a six-month bidding duel in August with UK liquor group Allied Domecq for the New Zealand winemaker Montana.

Lion walked away from that encounter with a A$70 million after-tax profit on selling its stake in Montana, and has put the money towards two Australian targets: Petaluma and a smaller winemaker, Banksia Wines.

Lion said this month that its goal now is to build a "globally competitive Australian-based premium wine business."

The move comes at a time of consolidation and intense competition for global liquor assets, with premium wine brands in high demand.

Apart from its stoush with Allied Domecq for Montana, Lion is up against three Australian groups that have all made recent acquisitions, including in the key U.S. market.

Rivals include Foster's, Southcorp, BRL Hardy

Foster's Group bought California-based Beringer Wines for $1.6 billion last year, while rival Southcorp spent almost $800 million in February to buy the premium Australian wine producer Rosemount.

The third key player, BRL Hardy, spent $100 million setting up the Pacific Wine Partners (PWP) joint venture in California in August with U.S.-based Constellation Brands.

Earlier this month PWP agreed to pay $140 million for the Californian wine business Blackstone. BRL Hardy has said it would spend up to $300 million to buy strong U.S. wine brands over the next year.

But while these acquisitions have been welcomed by the sharemarket, research by Adelaide University's Center for International Economic Studies points to a potential over-supply problem in the years ahead.

It said earlier this month that premium wine plantings in Australia, the U.S., South America and elsewhere would put pressure on wine prices by about 2005.