E-Malt.com News article: Australia: Any takeover of Australia’s Coopers Brewery is now much harder to succeed

The family that controls South Australia’s Coopers Brewery, Australia’s biggest locally owned brewer, has quietly changed the beverage company’s century-old constitution, which could make it almost impregnable to a hostile takeover by one of the global multinationals that control Australia’s A$7 billion beer market, The Australian reported on October 8.

The changes will likely dampen any appetite the nation’s biggest brewer Lion might have to re-enter the bruising and sometimes heated battle it fought in 2005 to grab control of Coopers in its ultimately failed A$420 million bid for the brewer.

It also puts up the “not for sale” sign to any other interloper such as second biggest player Carlton & United Breweries, which is owned by global brewing behemoth SABMiller.

Documents obtained by The Australian show that at a closed-door meeting of its tight-knit 143 shareholders held at the Coopers’ brewery in Adelaide, a tiny amendment was made to its constitution, which governs the way fair value of Coopers’ shares is calculated against the backdrop of a takeover.

The Coopers constitution, a complex document created in the 1920s and which was instrumental in sinking the hostile bid by Lion, then known as Lion Nathan, has been strengthened even more to what is referred to inside the Adelaide brewer as “belt and braces’’ protection that should keep it independent.

After SABMiller paid A$12.3 bln to acquire Foster’s in 2011 and with Lion owned by Japanese conglomerate Kirin, Coopers has emerged as the largest Australian-owned brewer, with a national market share of about 5 per cent.

Overseas players have long eyed Coopers’ portfolio of popular commercial and craft beers that has enabled the brewer to post double-digit sales and profit growth at a time when bigger rivals face sagging earnings.

But the Coopers family, which over 150 years has avoided any major brawls, splits or generational rebellions that could have seen the brewer fall into outsider hands, is building up its defences.

Coopers shareholders, of whom 90 per cent are linked — via birth or marriage — to the brewery’s 19th century founder, Thomas Cooper, have an internal market to trade their shares to other family members with the price of the stock determined by a valuer.

The amendment overwhelmingly supported by the Coopers family at a general meeting in June now means the valuer must ignore any offers at the time made by parties who are not members of the company when fair value of Coopers shares is determined for existing shareholders.

The valuer can decide upon a share price strictly confined to the commercial value of the business, its profit projections and balance sheet, and ignore any takeover premium on the table. “(The) proposed change to the constitution will mean that shareholders who wish to sell in the context of a takeover offer being made by a person who is not already a member of the company may not receive the price being offered if such price exceeds fair value,’’ the explanatory memorandum to shareholders says. “Shareholders who wish to buy such shares would have the right to buy them at the usual fair value price.’’

At the time of the failed Lion bid in 2005, KPMG advised the Coopers board it would take Lion’s takeover offer into account when determining fair value. This was crucial in the context of the battle, as Lion offered A$310 per share for Coopers compared to KPMG valuations — one at A$190 a share that ignored the Lion offer, and A$260 a share that matched Lion’s initial bid price before it was raised. “The directors of the company considered asking a court to determine whether this approach was appropriate given that many existing shareholders and their families would find it difficult to compete with a takeover price rather than the fair value prevailing in normal conditions,’’ the June 2014 notice of meeting reads.

Lion was forced to abandon the bid in late 2005 so the Coopers board did not need to refer the matter to a court. But now to avoid any doubt on the issue the constitution has been altered to make it clear offers for stock made by outsiders will be ignored when fair value is determined.

Coopers managing director, Tim Cooper, told The Australian the brewer was still subject to provisions of the Corporations Act when it came to takeover bids.

Dr Cooper said Coopers was not completely impregnable to a takeover, but conceded outsiders might view any future takeover was now much harder to succeed.


08 October, 2014