Lion Nathan

[rmbbrave]

Does anyone else own any Lion Nathan shares?

I bought at $5.55 in June 2002 and at $6.50 in Oct 2003 and now the SP is $8.50.

LNN is not a particulaly "exiting company" so it doesn't get talked about on Sharetrader, but it pays a dividend of 3-4% and the SP keeps going up.

Is it still worth buying at $8.50?

[craic]

I have 1,000 shares bought in Dec. 2000 that are now 51.3%above the purchase price and not counting the $800 dividends received in that time. I have no intention of selling but if I had extra cash, it would probably go to MHI in preference to LNN.

[rmbbrave]

Brewers keen to tap thirst for beer

Tuesday July 4, 2006


NEW DELHI - Heineken's Asia Pacific Breweries (APB) has announced its second investment in India in as many months, tapping into increasing demand for alcoholic beverages in the South Asian nation.

APB (parent of New Zealand's DB) will own 67 per cent of Pearl Breweries, a company the Heineken unit is setting up in a joint venture with Jaipuria Beverages & Food Industries.

Pearl will build a brewery in the southern state of Andhra Pradesh, India's biggest beer-consuming province.

The Dutch brewer owns about 42 per cent of APB.

Indians drink about 8 million hectoliters of beer a year, and the market is expanding by about 7 per cent annually, Heineken has said.

Andhra Pradesh makes up 16 per cent of India's total beer market, the outlook for which "bodes well" for long-term growth, Asia Pacific said.

The brewery, which is expected to start production by the end of 2007, is estimated to cost US$15 million ($24 million).

Equity investment in the brewery will be in proportion to the stakes of the partners, and is estimated not to exceed US$10 million.

On May 2, the regional unit of the Dutch brewer agreed to buy a 76 per cent stake in India's Aurangabad Breweries for US$18 million.

Brewers based in western Europe are expanding outside the region as demand for beer weakens in their domestic markets.

Scottish & Newcastle, Britain's largest beermaker, controls a 37.5 per cent stake in United Breweries, owner of India's biggest beer brand, Kingfisher.

The company holds the top position in India's beer market, according to Rabo Securities.

Asia Pacific Breweries is a Singapore-based brewery, which manages more than 40 beer brands and brand variants, including its flagship brands Tiger Beer and Heineken.

APB operates breweries in 10 countries in the Asia-Pacific region including Malaysia, Vietnam and China.

It has recently also entered new joint ventures to build breweries on undeveloped land in Laos and Mongolia.

- BLOOMBERG

[Snoopy]

quote:Originally posted by rmbbrave

Does anyone else own any Lion Nathan shares?

I bought at $5.55 in June 2002 and at $6.50 in Oct 2003 and now the SP is $8.50.

LNN is not a particularly "exiting company" so it doesn't get talked about on Sharetrader, but it pays a dividend of 3-4% and the SP keeps going up.

Is it still worth buying at $8.50?


Two and a half years later and the share price has climbed to as high as $NZ9.80. You have received dividends to the value of $A1.16 per share since that October 2004 posting. I guess that means the answer was 'yes' rmbbrave.

As a fellow Lion Nathan shareholder over that time I have enjoyed the ride with you rmbbrave (and you craic).

I am always impressed with a company that can resist 'the institutional imperative' and not make a big purchase. So I am pleased that when the late Michael Erceg's Independent Liquor came up for purchase, LNN didn't buy it at the *wrong* price. With LNN having given up on the growth engine of China, I can see LNN becoming more of a 'steady as she goes' share over the next few years. If the company is to be priced more on yield in the future, I think the LNN share price is close to topping out. The earnings per share over the last two years, plus earnings forecast for FY2007 paint a flat to declining picture. Under those circumstances can a PE of 19 (share price over $A9) be justified?

I am unsure about future plans to 'Invest in core brands' (is that doublespeak for more advertising?). Maybe Lion think the America's Cup will give them more exposure (are Steinlager still a sponsor?). Perhaps they think that an NZ Rugby World Cup win will see Steinlager take off in France? Will linking 'return on capital invested' into the CEO's salary package, [as well as the traditional EPS (earnings per share) hurdle] help restrain any associated bleeding advertising artery?

My gut feeling, to go back to the yachting metaphor, is that the 'breeze has shifted'. The easy gains - that of stripping costs out and streamlining the business - have been made. Growth is going to get harder. To some extent the mooted upping of the dividend payout from 70% to 80% of earnings is an admission of defeat.

Have I missed anything? (apart from noting that I still hold my LNN shares).

SNOOPY

[Snoopy]

If the company is to be priced more on yield in the future, I think the LNN share price is close to topping out. The earnings per share over the last two years, plus earnings forecast for FY2007 paint a flat to declining picture. Under those circumstances can a PE of 19 (share price over $A9) be justified?

My gut feeling, to go back to the yachting metaphor, is that the 'breeze has shifted'. The easy gains - that of stripping costs out and streamlining the business - have been made. Growth is going to get harder. To some extent the mooted upping of the dividend payout from 70% to 80% of earnings is an admission of defeat.


It is interesting that this once flagship New Zealand company has, since moving to Australia in June 2000, almost disappeared off the radar in both countries. NZ analysts seems to have forgotten it, despite there still being over 6000 NZ shareholders on the last published share register (vs 8200 Australians). In Australia, most of the broker reports since LNN retreated from China have said something like 'steady but boring' and 'one to accumulate' but 'only at the right price' (Don't pay more than a PE of 15). Nevertheless the share price has gone on to heights that made sure those following their brokers advice would never have bought.

One of my great investment mistakes was selling out of LNN when Kirin Breweries of Japan became the controlling shareholder, almost ten years ago to the day. I still remember that phone call. My broker rang up all keen and said there was a stand in the market for LNN shares at a substantial premium to the then pervailing price. IIRC by early afternoon it was all over and the deal had been done, leaving seething small shareholders who had 'missed out' angry. For those who don't understand how this was possible, it all happened *before* our takeovers code came into being and this sort of thing went on all the time. Yet it turned out that those who 'missed out' are now the ones who are sitting pretty!

The price I got at the time was $NZ5.40. Although a good deal 'at the time', $5.40 looks ludicrously cheap now. Having said I 'sold out', I actually only 'half sold out' as Kirins offer was only for a controlling stake. Anyway yesterday I corrected my mistake by buying back those shares at the equivalent of $NZ9.80 ($A8.13). :-(

Why did I buy back in? Well apart from the projected PE coming back to reasonable levels (16), Lion has just had a great track record ever since -well- as long ago as I can remember. That doesn't mean they have never made mistakes (I guess the aborted expansion into China will go down as one, the Pepsi distribution arrangement in NZ another). But they have certainly shown discipline in driving out of dead end roads. And despite trailing Fosters in overall Australian market share (Lion *only* have 42% of the Aussie beer market vs Foster's 50%), LNN also avoided their rivals big move into wine at what looks like with hindsight just the wrong time.

Often I find the more boring a company is, the better it is as an investment. That's because it slips under the radar of those always looking for 'the next big thing'. Most people just drink beer, they don't dream it. Since the fully Australian appointed management team took over in FY2002, underlying profit has risen by around 60%. The share price has risen likewise. Great things are predicted for new acquisition Tasmanian brewer Boags, with shareholders who attened the last AGM even going home with a free sample six pack. However, the acquisition will not be 'eps' positive until 2009, which is one factor in the current LNN shareprice slump. For FY2009 a significant improvement in profitability is promised, yet the sharemarket remains unmoved.

Personally if Lion can continue on their way in the same boring style of continuosly rising profits of the last ten years for the next ten, then I'll be very wealth..,errr happy.

SNOOPY

discl: hold LNN

[Snoopy]

It is interesting that this once flagship New Zealand company has, since moving to Australia in June 2000, almost disappeared off the radar. NZ analysts seems to have forgotten it, despite there still being over 6000 NZ shareholders on the last published share register.

Yesterday I corrected my mistake by buying back those shares at the equivalent of $NZ9.80 ($A8.13). :-(


Time to change face. Since I bought back in the share price has gone off like a rocket :-), closing up at $NZ10.62 today.

Not that it makes much difference to the total picture, such is the size of LNN these days. But I see the home of Macs is to be closed down!

------

Production of Nelson's Macs Beer is being shifted to Christchurch and Wellington.

From the end of the month, Lion Nathan will be using its St Asaph Street plant to produce the boutique beer, which has been made in Nelson since 1981.

Lion Nathan corporate affairs director, Liz Read says only seven per cent of the beer comes from Nelson at the moment and most of that is transported to Christchurch for packaging.

------

I still remember the outcry when rival brewer DB tried to close down the Monteiths Brewery on the West Coast because it was too successful and it wasn't practical to expand production there(!). Of course not all Monteiths is still brewed on the West Coast. But keeping a small production base at a beer's spiritual home is IMO, crucial to the credibility of any brand.

It seems LNN are going to get away with it though, judging by the total lack of counter comment. Personally I am stunned.

SNOOPY

discl: hold LNN, drink Macs

[Dr_Who]

I have emptied all the kegs of beers and replaced them with oil, sorry. :D:D

[Snoopy]

Since the fully Australian appointed management team took over in FY2002, underlying profit has risen by around 60%. The share price has risen likewise. Great things are predicted for new acquisition Tasmanian brewer Boags, with shareholders who attended the last AGM even going home with a free sample six pack. However, the acquisition will not be 'eps' positive until 2009, which is one factor in the current LNN shareprice slump. For FY2009 a significant improvement in profitability is promised, yet the sharemarket remains unmoved.


From p4 of the FY2008 Annual Report

"Since acquiring the the Boag's business in January, the Boags brands have contributed 28 million litres in volume and $60.9m in net sales revenue . The Boags trademark has grown 6% in volume since being integrated into Lion Nathan Australia. The company has signalled its committment to the brand and its Tasmanian provenance in committing $25m to upgrade the Boags brewery , increasing capacity and ensuring that all of Boags beers will be brewed in Tasmania. Additionally the investment in brand spend was updated in FY08 to refresh the Boags trademarks , particularly Boags Draught.. The Boags business represents a key growth driver for the business in FY09."

LNN continues to perform - steadily but not spectacularly- in tough times, and defy my scepticisim on their acquisitions strategy. Dividends paid out during the calendar year amounted to A41c per share. In NZD terms that means the share more or less broke even during the year, substantially outperforming the NZX. Just as well I am still a shareholder then!

SNOOPY

discl: hold LNN

[Snoopy]

Why did I buy back in? Well apart from the projected PE coming back to reasonable levels (16), Lion has just had a great track record ever since -well- as long ago as I can remember. That doesn't mean they have never made mistakes (I guess the aborted expansion into China will go down as one, the Pepsi distribution arrangement in NZ another). But they have certainly shown discipline in driving out of dead end roads.


A very interesting development late last year with the proposed takeover of Coca Cola Amatil (CCL) in Australia by Lion Nathan (LNN). To those of us with long memories of Lion Nathan's 'Pepsi experience in New Zealand' this may not be entirely welcome news. But considering we may be witnessing the creation of Australasia's largest beverage company bar none, then I think some observations are in order.

The whole deal has been very cleverly thought out, and is only possible through $A3.8billion in new capital to pay for new LNN shares from Lion Nathan's cornerstone shareholder Kirin in Japan. This money plus some $A800m in new borrowings - which the banks have already agreed to - will be used to pay out CCL shareholders to the tune of $6.15 per CCL share *plus* 0.469 LNN shares for every CCL share owned. Thus as well as getting a big payout, CCL shareholders will retain an ongoing interest in the new merged business through the issue new LNN shares in what will become 'Mergco'.

Ordinarily the news of the issue of new shares in any company would see the share price plummet. However, the extraordinary thing about this deal is that the new shares to be issued to Kirin are at a *premium* to market price - $11.50 - while the LNN share price hovers around $8-$9. That means should the deal go ahead, these new shares will effectively raise the value of existing LNN shares (as the old shares rally towards the 'new' price) rather than dilute them as would be the case if the new shares were to be issued at a discount. Also interesting is that existing LNN shareholders are not being asked to put up any new capital to help fund the deal. In summary, this looks very good for existing LNN shareholders. Almost too good to be true. So what's the catch?

The catch is that Kirin will end up with 47.5% of the new Mergeco, effective control, without existing LNN shareholders being offered anything of a takeover premium for ceding that control. Given Kirin already hold nearly 47.5% of the existing Lion Nathan, one might argue that shareholders are not really giving anything up. But I would argue they are because without the issue of new shares to Kirin, the existing Kirin Shareholding reduces in value to something like 23.5% of Mergeco. If Kirin wanted to maintain the same level of influence in the future, then they would have to make a partial takeover offer to all shareholders, a situation that the proposed Kirin capital raising is structured to avoid.

Now why should CCL management agree to this deal? Surprisingly almost none of them will lose their jobs as LNN resolves to keep the the soft drink and alcoholic beverage arms under existing management. Any growth will come from logistical savings, and the ability to bring in existing product into different geographic regions where the 'other' arm of the business is stronger.

O.K., we have seen why this deal is a good thing for existing LNN shareholders and what is in it for senior CCL and LNN managers, plus what is in it for Kirin. But the question that hasn't been answered is, what does everyone end up with? Based on an $A8 share price, LNN has a market capitaliation of $A4.274b on sales of $2.094b. Based on an $A9 share price CCL has a market capitalisation of $6.6b on sales of $4.017b. So actually what we have here is a medium sized fish trying to swallow a bigger one. The result will be more CCL than LNN, even if the resulting company is still called Lion Nathan.

Unlike LNN, CCL doesn't own most of their brands. Those well known soft drink brands are owned by the parent Coca Cola company in the United States. CCL just bottles them and pays a royalty. With some 30% of CCL, the US based Coca Cola parent could still scuttle this deal. But would they have any reason to? I am not sure. Will LNN have to raise their takeover offer to get approval from Coca Cola USA? I don't know. But with LNN closing at $A8.22 - equating to a CCL offer price of $A10.00 - and CCL itself closing at $A9.19, what does that tell us?

SNOOPY

discl: hold LNN

[Snoopy]

A very interesting development late last year with the proposed takeover of Coca Cola Amatil (CCL) in Australia by Lion Nathan (LNN).


Coca Cola in the US pulled the plug on the Lion Nathan / Coca Cola Amatil acquisition! I guess they couldn't stomach having their Australasia wide distribution arm under the control of the Japanese, no matter how much sense the financial game made. Exasperating for LNN management after all the trouble they went to. But in my mind this is positive for LNN, at least in the short term. A big acquisition/merger - however sound on paper - always entails some unexpected risk.

Almost as exasperating has been my own attempt to increase my shareholding in LNN. I bought some more LNN back in May 2008. I was wanting to buy still more in June 2008 but my buy order was 'timed out' (I refused to pay more than $8 per share). I put another order in during October 2008 and that got timed out too. Then come November the proposed CCA merger deal was put on the table. The LNN share price consequently plunged under $8 because of acquisition uncertainty. So there the shares were at my target price. But there was no way I was going to buy then until I could assimilate all of the risk factors of the propsed merger in my head.

The calling off of the LNN/CCA merger caused the LNN share price to soar. I thought my purchase hopes had then ended, particularly when at the AGM the profit projection of $A300-$A315m was reaffirmed. That represents projected earnings of 56-59cps. At $A8 that represents a PE of 13.6 to 14.2, PE figures I thought that I would not see again. $A8 I reasoned was good value given the strong historic growth record of LNN and the fact that during FY2009 earnings are expected to grow by 10-16% even in a recession. My third buy order was activated late last week and I picked up the shares I was after 9 months after I put in my original order! Alarmingly the LNN share price continued to fall to near twelve month lows in the $7.60s. At $7.60 we are looking at a projected PE of 13.0-13.5. That has to be an outstanding buying opportunity, does it not?

SNOOPY

discl: hold LNN, average holding time around ten years

[Snoopy]

Alarmingly the LNN share price continued to fall to near twelve month lows in the $7.60s. At $7.60 we are looking at a projected PE of 13.0-13.5. That has to be an outstanding buying opportunity, does it not?


Not much interest from sharechatters it seems, but Kirin Breweries at least agrees with me.

---------

WELLINGTON, April 23 (Reuters) - Australian drinks group Lion Nathan Ltd (LNN.AX) has received a proposal from top shareholder Kirin Holdings (2503.T) to buy out the 53.9 percent of shares it doesn't already own.

Lion said it had received a preliminary, non-binding and conditional approach from Japan's Kirin, which already holds 46 percent, to make an offer for the balance of the company.

Shares in Lion Nathan were placed on trading halt on the company's request: "in order to permit confidential discussions between Lion Nathan and Kirin to occur."

----------

It will be huge pity to lose LNN from the local market, following the delisting of DB a few years ago.

I'm inclined not accept the offer almost as a matter of principle, particularly given that I have spent this last year building it up from what was a modest base. Oh well, I guess we'll just have to wait and see what happens, under the *Australian* takeover code.

SNOOPY

discl: hold LNN

[Dr_Who]

Welldone Snoopy. You are onto it mate.

What's next on your target list?

[BRICKS]

THERE goes another NZ/AU company down the drain a short term win and a long term
DESASTER..

[Dr_Who]

We now dont have (amoungst many others) any bank or drinks company listed on the NZSE. :mad::confused:

How can someone take an exchange seriously when alot of the industries are not represented? Oh well, lets go shopping in Aussie instead, as always. ;)

[Jay]

What about Charlies!! :-)

[Snoopy]

THERE goes another NZ/AU company down the drain a short term win and a long term
DESASTER..

This 'desaster' (sic) is set to affect my bank account, in a significant way. Details of the offer have been released today

--

Minority Lion Nathan shareholders will receive A$11.50 per share from
Kirin ("Kirin Payment").
An additional special fully franked payment by Lion Nathan of A$0.72 per
share (including a proposed fully franked interim dividend of $A0.22 per
share) ("Additional Payment").

--

If the offer goes ahead like that, this is looking like my biggest ever investor payout. That should obviate my need to sell any shares to gain fresh investment capital for quite a while!

NZ shareholders will need to watch the market market price for LNN shares carefully. We can't make use of the franking credits. Aussie institutions can. So it is just possible that LNN may trade *above* the offer price as Aussie institutions look to hoover up those imputation credits. If that happens, and your brokerage charges are low enough, it might pay to sell your LNN shares on the market, rather than accept the offer.

Buyers in the NZX market for LNN at $NZ13.60 today. That is a bit light as the $A12.22 dividend and capital offer equates to $NZ15.27 per share at an exchange rate of $1NZ = A80c. Keep watching though.

SNOOPY

discl: hold LNN

[Sehnsucht888]

We now dont have (amoungst many others) any bank or drinks company listed on the NZSE. :mad::confused:

How can someone take an exchange seriously when alot of the industries are not represented? Oh well, lets go shopping in Aussie instead, as always. ;)

Westpac and ANZ still trade on the NZX....