Lion Nathan bids $4.9 billion for Coca-Cola Amatil

MELBOURNE (Reuters) - Lion Nathan Ltd LNN.AX, Australia's second-largest brewer, launched a A$7.6 billion ($4.9 billion) bid for soft drinks group Coca-Cola Amatil (CCL.AX) on Monday, the latest move in a wave of industry consolidation.

U.S.-based Coca-Cola Co (KO.N), which owns 30 percent of Coca-Cola Amatil, declined to comment on the offer. Spokesman Dana Bolden said, "It would be inappropriate for the Coca-Cola Co to comment at this time."

Lion Nathan's cash-and-stock bid, pitched at a 25 percent premium to Coca-Cola Amatil's share price, sent the target's shares up to a record high. But the shares later eased to trade below the offer value as Coca-Cola Amatil said the bid had material weaknesses and looked cheap compared with other recent deals.

"CCL is definitely not too happy with it. So, obviously, there is still a risk that the whole deal doesn't go through," said Theo Maas, a partner at Fortis Investment Partners, which manages A$5 billion, including Lion Nathan shares.

A takeover of Coca-Cola Amatil would give Lion Nathan a 60 percent share of Australia's A$10.3 billion soft drinks market as well as a canned fruits and vegetables business.

Lion Nathan, 46 percent-owned by Kirin Brewery Co, said the deal made sense, as there was little cannibalization between the businesses, and it could generate A$100-A$130 million mostly in savings on distribution to pubs, restaurants and caterers.

"That, coupled with the growth opportunities, makes the deal compelling," said Lion Nathan spokesman James Tait.

Recent months have seen a flood of consolidation among global brewers. Coca-Cola Amatil also has a beer joint venture, Pacific Beverages, with SAB Miller Plc, selling Peroni Nastro Azzurro and Miller Genuine Draft.

North American brewer Molson Coors Brewing Co this month emerged as the holder of a 5 percent interest in Lion Nathan's bigger rival, Foster's Group Ltd.

And Belgium's InBev NV is set to become the world's biggest brewer with a $52 billion takeover of Anheuser-Busch Cos Inc.

"Lion Nathan's picked a good time to make their offer," said White Funds Management portfolio manager Angus Gluskie.

He said Coca-Cola Amatil would struggle to defend the takeover, given uncertain markets and a slower Australian economy.

RISKS TO DEAL

Coca-Cola Amatil's shares briefly rocketed to A$12 before easing to close up 13 percent at A$9.31, 9 percent below the implied offer value of A$10.21, based on Lion Nathan's 3 percent share price fall to A$8.65.

Coca-Cola Amatil said there was no guarantee its board or Coca-Cola Co would back the offer, particularly as it was pitched below valuations on recent drinks deals.

Last month France's Group Danone sold its Frucor drinks arm in Australia and New Zealand for 14 times Frucor's earnings before interest, tax, depreciation and amortization, well above the 10.3 multiple Lion Nathan is offering.

However, Lion Nathan said Frucor was not a fair comparison as it was a small company that owned its brands, while Coca-Cola Amatil is essentially a bottler of brands, such as Coke, Sprite and Fanta, owned by its parent.

Coca-Cola also makes bottled water, Goulburn Valley juices, IXL jams, and SPC and Ardmona canned fruits and vegetables.

Coca-Cola Amatil is being advised by Macquarie Capital Advisers. Lion Nathan is being advised by Caliburn, and JP Morgan is advising Kirin.

Lion Nathan's move took the market by surprise, as focus has been on Coca-Cola Amatil's expansion plans and Australian drinks giant Foster's, which is trying to decide what to do with its troubled wine business, the world's second largest.

Coca-Cola Amatil missed out on buying Frucor and is eyeing Britain's Cadbury Plc's Australian Schweppes business.

Kirin has already been expanding in Australia as its home beer market shrinks. Last week, it sealed a A$910 million deal to buy milk co-operative Dairy Farmers through National Foods.

It committed to put up A$3.76 billion to help Lion Nathan fund the bid for Coca-Cola Amatil, buying new shares of Lion Nathan at A$11.50 each, a 32 percent premium to Lion Nathan's last trade. That would give Kirin a 47.5 percent stake in the enlarged group.

Under Lion Nathan's proposal, Coca-Cola Amatil shareholders would receive A$6.15 in cash plus 0.469 Lion shares for each Coca-Cola Amatil share. Based on last Friday's close, the offer valued CC Amatil at A$10.35 a share.

Lion Nathan has lined up A$800 million in debt funding to help cover the cash portion of the deal.

($1=A$1.56)

(Additional reporting by Denny Thomas in Sydney, Taiga Uranaka in Tokyo and Lisa Baertlein in Los Angeles; Editing by Jean Yoon and John Wallace)