17/11/2008 - 08:44

CC Amatil and Lion Nathan merger brewing

17/11/2008 - 08:44

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Beverage group Coca Cola Amatil says it has received a merger proposal from Australia's second-largest brewer, Lion Nathan, that values the target at around $7.61 billion.

Beverage group Coca Cola Amatil says it has received a merger proposal from Australia's second-largest brewer, Lion Nathan, that values the target at around $7.61 billion.

However, its board believes the incomplete and non-binding proposal had a number of "material deficiencies" and there was no assurance that the offer would proceed.

CCA said it has been in talks with Lion Nathan since it first received the proposal on November 7.

Lion Nathan's proposal, which is supported by its major shareholder Kirin Holdings Company, offers CCA shareholders a mix of cash and scrip, comprising $4.54 billion cash and 346 million Lion shares.

The offer represents $6.15 per CCA share and 0.469 Lion shares for every one CCA share, on the basis of a consideration mix of around 60 per cent cash and 40 per cent Lion shares.

Based on Lion's closing price on November 7 of $9.10 per share, the proposal represents consideration of $10.42 per CCA share, a premium of 22 per cent.

The per shares consideration falls to $10.25 per CCA share, or a total of $7.61 billion, based on Lion Nathan's closing price on Friday of $8.95.

"The CCA board has reviewed its position and believes that there are a number of material deficiencies in the proposal, which is subject to a range of material conditions precedent," CCA said.

"In particular, the pricing multiple proposed is materially below recent multiples paid for domestic and international beverage companies.

"The CCA board can give no assurance that the proposal will proceed or will be supported by the CCA board or its major supplier, the Coca-Cola Company."

CCA said it has engaged Macquarie Capital Advisers as financial adviser and Gilbert & Tobin as legal adviser.

A merger of CCA, which makes drinks such as Powerade, Mount Franklin water and Sprite, and Lion Nathan, the company behind brands such as Boag's, Tooheys and "XXXX", would create a soft drink and beer giant valued at around $12 billion.

Shares in Lion Nathan, which has a market value of $4.78 billion, were placed in a trading halt before the announcement was made.

CCA shares had jumped $1.26, or 15.27 per cent, to $9.51 by 1038 AEDT, giving it a value of $7 billion.

The stock rose as high as $12 in early trading.

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