Lion Nathan Limited Booklet Scheme
The Independent Directors unanimously recommend that you VOTE IN FAVOUR of the Scheme, in the absence of a Superior Proposal.
www.lion-nathan.com THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. FINANCIAL ADVISER LEGAL ADVISER YOU SHOULD READ IT IN ITS ENTIRETY PRIOR TO DECIDING WHETHER OR NOT TO VOTE IN FAVOUR OF THE SCHEME. IF YOU ARE IN DOUBT AS TO WHAT YOU SHOULD DO, YOU SHOULD CONSULT YOUR LEGAL, INVESTMENT OR OTHER PROFESSIONAL ADVISER. LION NATHAN LIMITED ACN 093 160 448 lion nathan SCHEME BOOKLET 2009
Important Notices
Purpose Of Scheme Booklet advisers do not assume any responsibility for the accuracy or This Scheme Booklet includes the explanatory statement required to be sent to completeness of the Independent Expert’s Report. Shareholders under Part 5.1 of the Corporations Act in relation to the Scheme. ASIC, ASX and NZX The purpose of this Scheme Booklet is to explain the terms of the Scheme ASIC has reviewed a copy of this Scheme Booklet. Lion Nathan has asked and the manner in which the Scheme will be considered and implemented ASIC to provide a statement, in accordance with section 411(17)(b) of the (if approved by a Requisite Majority of Non-Kirin Shareholders and by the Corporations Act, that ASIC has no objection to the Scheme. ASIC’s policy Court) and to provide information as is prescribed or otherwise material to in relation to statements under section 411(17)(b) of the Corporations Act is the decision of Non-Kirin Shareholders whether or not to vote in favour of that it will not provide such a statement until the Second Court Date. This is the Scheme. because ASIC will not be in a position to advise the Court until it has had an Read Entire Scheme Booklet opportunity to observe the entire Scheme process. If ASIC provides that Shareholders are encouraged to read this Scheme Booklet in its entirety statement, then it will be produced to the Court on the Second Court Date. before making a decision on whether or not to vote in favour of the Scheme. A copy of this Scheme Booklet has been lodged with ASX and NZX. Glossary And Defined Terms Neither ASIC, ASX, NZX nor any of their respective officers take any A number of terms used in this Scheme Booklet have special meanings. responsibility for the contents of this Scheme Booklet. These are listed in the Glossary at the back of this Scheme Booklet. Each Court of the documents reproduced in some of the Annexures to this Scheme The Court is not responsible for the contents of this Scheme Booklet and, Booklet has its own defined terms, which are sometimes different from in ordering that the Scheme Meeting be held, the Court does not in any way those in the Glossary. indicate that the Court has approved or will approve the terms of the Scheme. Unless otherwise stated, all data contained in charts, graphs and tables is An order of the Court under section 411(1) of the Corporations Act is not an based on information available at the date of this document. All numbers endorsement of, or any other expression of opinion on, the Scheme. are rounded unless otherwise indicated. Shareholders Outside Australia The financial amounts in this Scheme Booklet are expressed in Australian This Scheme Booklet is subject to Australian disclosure requirements. currency unless otherwise stated. A reference to $, A$, AUD and cents is Financial information in this Scheme Booklet has been prepared in to Australian currency, unless otherwise stated. accordance with AIFRS and is presented in an abbreviated form and does All times referred to in this Scheme Booklet are references to time in not contain all the disclosures that are usually provided in an annual report Sydney, Australia, unless otherwise stated. prepared in accordance with the Corporations Act. Investment Decisions Australian disclosure requirements and AIFRS may be different from those This Scheme Booklet is intended for Non-Kirin Shareholders collectively applicable in other jurisdictions. and does not take into account the investment objectives, financial situation Tax Implications Of The Scheme and particular needs of each security holder or any other particular person. Section 5 of this Scheme Booklet provides a general outline of the Australian This Scheme Booklet should not be relied upon as the sole basis for any and New Zealand income tax, capital gains tax, GST and stamp duty investment decision in relation to the Scheme or your Shares. Before making consequences for Non-Kirin Shareholders who receive the Special Dividend any investment decision in relation to the Scheme or your Shares, including and/or dispose of their Shares to the Australian Holding Company in accordance any decision to vote in favour of or against the Scheme, you should consider, with the Scheme. It does not purport to be a complete analysis nor to identify all with or without the assistance of a financial adviser, whether that decision is potential tax consequences nor is it intended to replace the need for specialist appropriate in the light of your particular investment needs, objectives and tax advice in respect of the particular circumstances of individual Shareholders. financial circumstances. If you are in any doubt about what you should do, Shareholders who are subject to taxation outside Australia and you should seek independent financial and taxation advice before making any New Zealand should also consult their tax adviser as to the applicable investment decision in relation to the Scheme or your Shares. tax consequences of the Scheme in the relevant jurisdiction. Future Matters And Intentions Privacy Certain statements in this Scheme Booklet relate to the future. These Lion Nathan may collect personal information in the process of implementing the statements involve known and unknown risks, uncertainties and other Scheme. This information may include the names, contact details and security important factors that could cause the actual results, performance or holdings of Shareholders and the names of persons appointed by Shareholders lion nathan lion li m it e d nathan 2009 achievements to be materially different from expected future results, to act as proxy, corporate representative or attorney at the Scheme Meeting. performance or achievements expressed or implied by those statements. The primary purpose of collecting this information is to assist Lion Nathan in the These statements reflect only views held at the date of this Scheme Booklet. conduct of the Scheme Meeting and to enable the Scheme to be implemented None of Lion Nathan or Kirin, any director of those companies nor any by Lion Nathan in the manner described in this Scheme Booklet. The collection other person gives any representation, assurance or guarantee that the of this personal information is required or authorised by the Corporations Act. events expressed or implied in any forward looking statements in this Personal information may be disclosed to the Share Registry, to print and Scheme Booklet will actually occur and you are cautioned not to place mail service providers, to authorised securities brokers and to Kirin. undue reliance on such future statements. Shareholders have the right to access personal information that has been Responsibility For Information collected. They should contact the Share Registry in the first instance if The information contained in this Scheme Booklet other than in Section 4 they wish to exercise this right. and the Independent Expert’s Report (Lion Nathan Information) has been prepared by Lion Nathan and the Independent Directors and is the Shareholders who appoint a named person to act as their proxy, corporate responsibility of Lion Nathan. None of Kirin, its advisers or the Kirin representative or attorney at the Scheme Meeting should ensure that they Nominee Directors assume any responsibility for the accuracy or inform that person of the matters outlined above. completeness of the Lion Nathan Information. Information Line The information contained in Section 4 of this Scheme Booklet (Kirin If you have any questions about your Shares or any other matter in this Information) has been provided by Kirin and is the responsibility of Kirin. Scheme Booklet, please call the Lion Nathan Information Line on 1800 211 826 None of Lion Nathan, its advisers or the Independent Directors assume any (within Australia), 0800 630 109 (within New Zealand) or +61 2 8986 9354 responsibility for the accuracy or completeness of the Kirin Information (outside Australia and New Zealand) between 9.00am and 5.00pm (Sydney except to the extent that Lion Nathan has provided Kirin with information time) Monday to Friday. for the purpose of Kirin preparing information on the merged entity Lion Nathan And Kirin Websites following implementation of the Scheme. The content of Lion Nathan’s and Kirin’s respective websites do not form part Lonergan Edwards & Associates Limited has prepared an Independent of this Scheme Booklet and Shareholders should not rely on any such content. Expert’s Report set out in Annexure D and takes responsibility for that Date Of Scheme Booklet report. Lion Nathan, Kirin and their respective directors, officers and This Scheme Booklet is dated 6 August 2009. : auckland LIO223 08/09 contents y dne y/ s . Important Notices IFC 1 Matters relevant to your vote Annexure B - Scheme of on the Scheme 9 Arrangement 51
Chairman’s letter 1 creative Important Dates 2 2 Details of the Scheme 12 Annexure C - Deed Poll 57 Scheme Highlights 3 3 Information on Lion Nathan 15 Annexure D - Independent y: I nsight y:
Expert’s Report 61 b Independent Directors’ Recommendation, 4 Information on Kirin 17 and Reasons to Vote in Favour of or 5 Taxation implications for Annexure E - Lion Nathan’s ASX Announcements from 31 March 2009 154
Against the Scheme 4 Shareholders 21 produced Annexure F - Notice of Court Voting information 5 6 Additional Information 23 and Ordered Meeting of Shareholders Questions and Answers 6 7 Glossary and Interpretation 28 of Lion Nathan 155
Annexure A - Implementation D esigned Agreement 30 LION NATHAN SCHEME BOOKLET 2009
Chairman’s letter
6 August 2009
Dear Shareholder,
As you will be aware, on 11 May 2009, Lion Nathan Limited (Lion Nathan) announced that it had entered into an Implementation Agreement with its major shareholder Kirin Holdings Company, Limited (Kirin), in relation to Kirin’s offer to acquire all of the shares in Lion Nathan that it does not already own by way of a scheme of arrangement. This followed the receipt of Kirin’s initial proposal on 22 April 2009 and, thereafter, detailed discussions between Lion Nathan and Kirin.
If the Scheme is approved and implemented, relevant Shareholders will receive cash payments equal to $12.00 per Share (Cash Payments) comprising:
•• Scheme Consideration of $11.50 for each Share held by a Non-Kirin Shareholder as at the Scheme Record Date;
•• A Special Dividend of $0.50 in relation to each Share held by a Shareholder as at the Special Dividend Record Date. The Special Dividend will be fully franked with Australian franking credits and partly imputed utilising available New Zealand imputation credits.
Lion Nathan paid an interim dividend of $0.22 per Share on 23 June 2009 (Interim Dividend), which had the effect of adjusting the total original offer consideration from $12.22 (which included the Interim Dividend) to $12.00 per Share.
The Cash Payments of $12.00 per Share represent a substantial premium to Lion Nathan’s historical trading prices and also compares favourably to historical precedent transactions.
Lion Nathan’s Independent Directors unanimously recommend that Non-Kirin Shareholders vote in favour limite d 2009 of the Scheme and the Independent Directors intend to vote the Shares they own or control in favour of the Scheme, in each case in the absence of a Superior Proposal. nathan The Independent Expert, Lonergan Edwards & Associates Limited, has concluded that the Scheme is fair and reasonable and in the best interests of Non-Kirin Shareholders. The Independent Expert’s Report is lion included in Annexure D of this booklet and I strongly encourage you to read it. 1
The Scheme requires the approval of a Requisite Majority of Non-Kirin Shareholders and the Court. The Scheme Meeting, at which Non-Kirin Shareholders are able to consider approving the Scheme, will be held at 10.00am on Thursday 17 September 2009. If you are unable to attend on this day, you are encouraged to vote by completing the enclosed personalised proxy form for the Scheme Meeting and returning it to the Share Registry so that it is received by 10.00am on Tuesday 15 September 2009. It is proposed that Court approval will be sought approximately 21 days after the Scheme Meeting.
Further information in relation to the Scheme is contained in this Scheme Booklet. I encourage you to read it in its entirety before making your decision and voting at the Scheme Meeting. If you have any questions in relation to any part of the Scheme, please call the Lion Nathan Information Line on 1800 211 826 (within Australia), 0800 630 109 (within New Zealand) or +61 2 8986 9354 (outside Australia and New Zealand) between 9.00am and 5.00pm (Sydney time) Monday to Friday, or visit the Lion Nathan website - www.lion-nathan.com.
I look forward to seeing you on Thursday 17 September 2009.
Yours sincerely,
Geoff Ricketts Chairman Lion Nathan Limited lion nathan SCHEME BOOKLET 2009
IMPORTANT DATES
Scheme Booklet and Notice of Meeting despatched to Shareholders Tuesday, 18 August 2009
Latest time and date for receipt of proxy forms for Scheme Meeting 10.00am, Tuesday, 15 September 2009
Time and date for determining eligibility to vote at the Scheme Meeting 7.00pm, Tuesday, 15 September 2009
Shareholders’ meeting to vote on the Scheme 10.00am Thursday, 17 September 2009
If the Scheme is approved by a Requisite Majority of Non-Kirin Shareholders
Record date for determining entitlement to receive Special Dividend (Special Dividend Record Date) 7.00pm, Friday, 25 September 2009
limite d 2009 Payment of the Special Dividend Tuesday, 6 October 2009
nathan Second Court Date for approval of Scheme Wednesday, 7 October 2009 lion
2 Court order is lodged with ASIC and Scheme takes effect (Effective Date) Wednesday, 7 October 2009
Suspension of Shares from trading on ASX and NZSX Close of trading on Wednesday, 7 October 2009
Record date for determining entitlement to receive Scheme Consideration (Scheme Record Date) 7.00pm, Wednesday, 14 October 2009
Implementation of the Scheme (Implementation Date) Wednesday, 21 October 2009
NOTE: Unless otherwise stated, all times referred to in this Scheme Booklet are references to time in Sydney, Australia. Dates are indicative only. Lion Nathan reserves the right to vary the times and dates set out above, subject to the approval of such variation by ASIC, ASX, the Court and Kirin, where required. Any changes to the above timetable will be announced through the ASX and NZSX and notified on Lion Nathan’s website, www.lion-nathan.com. LION NATHAN SCHEME BOOKLET 2009
Scheme Highlights
Cash Payments
If the Scheme is approved and implemented, relevant Shareholders will receive Cash Payments equal to $12.00 per Share, comprising:
•• Scheme Consideration of $11.50 for each Share held by a Non-Kirin Shareholder as at the Scheme Record Date;
•• a Special Dividend of $0.50 in relation to each Share held by a Shareholder as at the Special Dividend Record Date.
The Special Dividend will be fully franked with Australian franking credits and partly imputed utilising available New Zealand imputation credits.
The payment of the Special Dividend is conditional on a Requisite Majority of Non-Kirin Shareholders approving the Scheme at the Scheme Meeting. The payment of the Scheme Consideration will be made as part of the implementation of the Scheme.
You will only receive the Special Dividend for Shares you hold on the Special Dividend Record Date, and the Scheme Consideration for Shares you hold on the Scheme Record Date. The Special Dividend Record Date is expected to be 7.00pm on 25 September 2009, which is 19 days before the Scheme Record Date. Shares will trade ex-entitlement on 21 September 2009 and Shares acquired on that date will not be entitled to the Special Dividend.
Independent Directors’ Recommendation and Vote
The Independent Directors unanimously recommend that you vote in favour of the Scheme and the Independent Directors who hold Shares intend to vote the Shares they own or control in favour of the Scheme, in each case in the absence of a Superior Proposal.
Independent Expert’s Conclusion
The Independent Expert has concluded that the Scheme is fair and reasonable and in the best interests of Non-Kirin Shareholders. limite d 2009
Substantial Premium to historical trading prices nathan The Cash Payments of $12.00 per Share which will be paid to relevant Shareholders if the Scheme becomes Effective represent a premium of 54.4% to the ex-Interim Dividend volume weighted average price (VWAP) of $7.77 for Shares quoted on ASX in the one month lion up to and including 22 April 2009 (the day prior to Lion Nathan’s announcement of the receipt of Kirin’s proposal). 3
No Alternative Proposal
As at the date of this Scheme Booklet, no alternative proposal has emerged. Given the time that has elapsed since the announcement of the Independent Directors’ recommendation of the Kirin proposal on 27 April 2009, and the fact that Kirin currently holds 46.13% of Lion Nathan, it is the view of the Independent Directors that a Superior Proposal is unlikely to emerge prior to the Scheme Meeting.
Share Price May Fall if the scheme is not approved
Lion Nathan’s Share price may fall if the Scheme is not approved.
No Transfer Costs
No brokerage or stamp duty will be payable by you on the transfer of your Shares pursuant to the Scheme.
The Independent Directors unanimously recommend that you VOTE IN FAVOUR of the Scheme, in the absence of a Superior Proposal lion nathan SCHEME BOOKLET 2009
Independent Directors’ Recommendation, and Reasons to Vote in Favour of or Against the Scheme*
Reasons to vote in favour of the Scheme
✔ Your Independent Directors unanimously recommend that you vote in favour of the Scheme in the absence of a Superior Proposal
✔ The Independent Expert has concluded that the Scheme is fair and reasonable and in the best interests of Non-Kirin Shareholders
✔ You are being offered a substantial premium to historical trading prices
✔ The Cash Payments of $12.00 per Share compares favourably to historical precedent transactions
✔ The Special Dividend will be fully franked with Australian franking credits and partly imputed utilising available New Zealand imputation credits which may have incremental value for
limite d 2009 certain Shareholders nathan ✔ No alternative proposal has emerged as at the date of this Scheme Booklet lion
4 ✔ The Lion Nathan share price may fall if the Scheme is not approved
✔ If implemented, the Scheme provides you with the value and certainty of cash in this uncertain environment
✔ No brokerage or stamp duty will be payable by you on the transfer of your Shares
Possible reasons not to vote in favour of the Scheme
>> You may disagree with the Independent Directors and the Independent Expert and believe that the Scheme is not in your best interests
>> If the Scheme proceeds you will no longer be a shareholder of Lion Nathan and you will not participate in any potential upside that may result from being a shareholder of Lion Nathan
>> If the Scheme proceeds, Non-Kirin Shareholders will not participate in future dividends of Lion Nathan (other than the Special Dividend)
>> The tax consequences of the Scheme for you may not be optimal for your financial position
* For detailed information on the case for Voting in Favour of the Scheme, please refer to supporting data on pages 9-11 LION NATHAN SCHEME BOOKLET 2009
Voting information
Your Vote Is Important How To Vote By Proxy
For the Scheme to proceed, it is necessary that a Requisite Your personalised proxy form for the Scheme Meeting Majority of Non-Kirin Shareholders vote in favour of the Scheme. accompanies this Scheme Booklet. Information setting out The Scheme is also subject to Court approval. how you may vote by proxy is contained in the Notice of Meeting. If your proxy is signed by an attorney, please also This Scheme Booklet includes the Notice of Meeting and enclose the authority under which the proxy is signed (or a encloses a personalised proxy form for the Scheme Meeting. certified copy of the authority). Voting Entitlements Proxy forms may be lodged as follows: If you are registered on the Share Register at 7.00pm on •• deliver the completed proxy form to Computershare Investor 15 September 2009 as a Non-Kirin Shareholder, you will Services Pty Limited, located at Level 2, 60 Carrington be entitled to vote on the resolution to approve the Scheme Street, Sydney NSW 2000; at the Scheme Meeting. Accordingly, registrable transmission applications or transfers registered after this time will be •• mail the completed proxy form to Computershare Investor disregarded in determining entitlements to vote at the Services Pty Limited using the reply paid envelope; Scheme Meeting. •• fax the completed proxy form to Computershare Investor If Shares are jointly held, only one of the joint Shareholders is Services Pty Limited on 1800 783 447 (within Australia) or entitled to vote. If more than one joint Shareholder votes, only +61 3 9473 2555 (outside Australia); or the vote of the Shareholder whose name appears first on the •• sent electronically via the internet, by visiting Register will be counted. www.lion-nathan.com and clicking on the “Scheme How To Vote In Person Proxy Voting” icon.
To vote in person at the Scheme Meeting, Non-Kirin Proxy forms, together with any power of attorney or authority Shareholders must attend the Scheme Meeting to be held under which the proxy form is signed, must be received no later at 10.00am on 17 September 2009 at the Grand Ballroom, than 10.00am on 15 September 2009. Proxy forms received Hilton Sydney, 488 George Street, Sydney. after this time will be invalid.
A Non-Kirin Shareholder who wishes to attend and vote at A proxy will be admitted to the Scheme Meeting and given a the Scheme Meeting in person will be admitted to the Scheme voting card upon providing, at the point of entry to the Scheme Meeting and given a voting card upon disclosure at the point Meeting, written evidence of their name and address. The of entry of their name and address. sending of a proxy form will not preclude a Shareholder from limite d 2009 attending in person and voting at the Scheme Meeting. Persons who are attending as an attorney should bring the However, the Corporations Act specifies that the presence of original or a certified copy of the power of attorney to the nathan a Shareholder at a meeting suspends his or her proxy’s rights Scheme Meeting, unless Lion Nathan has already noted it. to speak and vote. lion Persons who are attending as a corporate representative for a corporation must bring evidence of their appointment. 5 The appointment must comply with section 250D of the Corporations Act. An authorised corporate representative will be admitted to the Scheme Meeting and given a voting card upon providing, at the point of entry to the Scheme Meeting, written evidence of their appointment (including any authority under which it is signed), their name and address and the identity of their appointer. lion nathan SCHEME BOOKLET 2009
Questions and Answers
This Scheme Booklet contains detailed information regarding •• a Special Dividend of $0.50 in relation to each Share held the Scheme. The following section provides summary answers by a Shareholder as at the Special Dividend Record Date. to some questions you may have and will assist you to locate The payment of the Special Dividend is conditional on a Requisite further detailed information in this Scheme Booklet. Majority of Non-Kirin Shareholders approving the Scheme at the Scheme Meeting. The payment of the Scheme Consideration will THE SCHEME AT A GLANCE be made as part of implementation of the Scheme. What is the Scheme? You will only receive the Special Dividend for Shares you The Scheme involves Kirin, through its wholly owned subsidiary, hold on the Special Dividend Record Date, and the Scheme Kirin Holdings (Australia) Pty Ltd (Australian Holding Company) Consideration for Shares you hold on the Scheme Record Date. acquiring all of Lion Nathan’s issued shares that Kirin does not The Special Dividend Record Date is expected to be 7.00pm on already own by way of a ‘scheme of arrangement’. 25 September 2009, which is 19 days before the Scheme Record Date. Shares will trade ex-entitlement on 21 September What is a ‘Scheme of Arrangement’ 2009 and Shares acquired on that date will not be entitled to the A ‘scheme of arrangement’ is a means of implementing an Special Dividend. acquisition of shares under the Corporations Act. It requires a Will the Special Dividend attach Australian franking credits or vote in favour of the Scheme by a Requisite Majority of Non-Kirin utilise New Zealand imputation credits? Shareholders at a meeting of Non-Kirin Shareholders (Scheme Meeting), and Court approval. The Special Dividend will be fully franked with Australian franking credits and partly imputed utilising available New Zealand A detailed description of the Scheme is set out in Section 2. imputation credits. The terms of the Scheme are set out in full in Annexure B. If the Special Dividend is paid within three months of being What do the Independent Directors recommend? determined, as is intended, NZD0.29 imputation credits will be The Independent Directors consider that the Scheme is in attached to the $0.50 Special Dividend (which itself will be the best interests of Non-Kirin Shareholders. The Independent converted to NZD in accordance with Section 2.7). If the Special Directors unanimously recommend that, in the absence Dividend is not paid within three months of being determined, the of a Superior Proposal, you vote in favour of the Scheme. exact amount of New Zealand imputation credits that can be The basis for this recommendation is set out in Section 1.1. attached to the Special Dividend will depend on the exchange Each Independent Director who owns or controls Shares, rate between Australia and New Zealand when the Special limite d 2009 intends to vote in favour of the Scheme, in the absence of Dividend is paid. a Superior Proposal. What will I receive if the Scheme is not approved by
nathan Section 1.2 also includes a summary of the possible reasons a Requisite Majority of Non-Kirin Shareholders at the not to vote in favour of the Scheme. Scheme Meeting? lion What is the Independent Expert’s conclusion? If the Scheme is not approved by a Requisite Majority of Non-Kirin Shareholders at the Scheme Meeting, you will not 6 The Independent Directors engaged Lonergan Edwards & receive the Scheme Consideration or the Special Dividend. Associates Limited as Independent Expert to provide a report. The Independent Expert has concluded that the Scheme is In that event, it is currently expected that the Board will follow its fair and reasonable and in the best interests of Non-Kirin normal dividend policy in relation to the determination of a final Shareholders. dividend for 2009.
The Independent Expert’s Report is included in Annexure D. When will the Special Dividend be paid?
What are the prospects of receiving a Superior Proposal? If you hold Shares on the Special Dividend Record Date, your Special Dividend will be paid no later than the Business Day Since the Scheme was announced, no Superior Proposal has before the Second Court Date. emerged. Given the time that has elapsed since the announcement of the Independent Directors’ recommendation of the Kirin If the Scheme is not approved by a Requisite Majority of proposal on 27 April 2009, and the fact that Kirin currently holds Non-Kirin Shareholders at the Scheme Meeting, the Special 46.13% of Lion Nathan, it is the view of the Independent Directors Dividend will not be paid. that a Superior Proposal is unlikely to emerge prior to the When will the Scheme Consideration be paid? Scheme Meeting. If you hold Shares on the Scheme Record Date, you will be paid What should I do? your Scheme Consideration within 5 Business Days after the You should read this Scheme Booklet carefully in its entirety Implementation Date. and then vote by attending the Scheme Meeting, or by appointing If the Scheme is not approved by a Requisite Majority of a proxy to vote on your behalf. Full details of who is eligible to Non-Kirin Shareholders at the Scheme Meeting and by the vote and how to vote are set out on page 5. Court, the Scheme Consideration will not be paid.
WHAT YOU WILL RECEIVE UNDER THE SCHEME I am a New Zealand Shareholder - will I receive my Cash Payments in New Zealand currency? What Cash Payments will I receive? If you have a payment direction for a New Zealand bank If the Scheme is approved and implemented, relevant account recorded with the Share Registry as at the Special Shareholders will receive Cash Payments equal to $12.00 Dividend Record Date, you will be paid your Special Dividend per Share, comprising: in New Zealand currency. If you have a payment direction for •• Scheme Consideration of $11.50 for each Share held by a New Zealand bank account recorded with the Share Registry a Non-Kirin Shareholder as at the Scheme Record Date; as at the Scheme Record Date, you will be paid your Scheme LION NATHAN SCHEME BOOKLET 2009
Consideration in New Zealand currency. All other Non-Kirin •• at least 75% of the total number of votes cast on the Shareholders will receive the Special Dividend and Scheme resolution to approve the Scheme. Consideration in Australian currency. Kirin and its Related Bodies Corporate will not vote at the The payments in New Zealand currency will involve conversion Scheme Meeting. from Australian currency into New Zealand currency. For the It is also necessary for the Court to approve the Scheme before Special Dividend, the exchange rate for conversion will be it can become Effective. established within two Business Days after the Special Dividend Record Date – which is expected to be 7.00pm on 25 September What choices do I have as a Non-Kirin Shareholder? 2009, which is approximately 11 days before the scheduled date As a Non-Kirin Shareholder you have the following choices: for payment of the Special Dividend. For the Scheme Consideration, the exchange rate for conversion will be •• you can vote in person or by proxy at the Scheme Meeting; established within two Business Days after the Scheme Record •• you can elect not to vote at the Scheme Meeting; or Date - which is expected to be 7.00pm on 14 October 2009, which is approximately 7 days before the Implementation Date. •• you can sell your Shares on ASX or NZSX. If you sell your Shares on ASX or NZSX you may incur brokerage costs. New Zealand Shareholders will carry full exchange rate risk relating to any changes in the Australian dollar-New Zealand Should I vote? dollar exchange rate following the conversion of the Special Voting is not compulsory. However, the Independent Directors Dividend and Scheme Consideration into New Zealand currency. believe that the Scheme is important to all Non-Kirin When the Special Dividend and the Scheme Consideration are Shareholders and the Independent Directors unanimously actually paid in New Zealand currency those amounts may be recommend that you vote in favour of the Scheme in the worth less (or more) than the Australian dollar amount at the absence of a Superior Proposal. time the exchange rate for conversion was established. How do I vote? What are the tax consequences of the Scheme for me? You may vote in person by attending the Scheme Meeting to Section 5 provides a general outline of the Australian and be held at 10.00am on 17 September 2009. Alternatively, New Zealand income tax, capital gains tax, GST and stamp duty you may vote by completing and lodging a proxy form that consequences for Non-Kirin Shareholders who receive the is enclosed with this Scheme Booklet. The proxy form can Special Dividend and/or dispose of their Shares to the Australian be lodged in person, by mail, by fax, or online – see page 5 for Holding Company in accordance with the Scheme.
further details. limite d 2009 You should consult with your own tax adviser regarding the You can also vote by appointing a body corporate representative consequences of receiving the Special Dividend and disposing (if you are a body corporate) or an attorney. of your Shares to the Australian Holding Company in accordance nathan with the Scheme in light of current tax laws and your particular Full details of how to vote and how to lodge a proxy form, body investment circumstances. corporate representative appointment or power of attorney are lion set out in the ‘Voting Information’ Section commencing on page 5. Will I have to pay brokerage fees or stamp duty? 7 What happens if I do not vote, or I vote against the Scheme? No, you will not have to pay any brokerage or stamp duty in connection with the Scheme. The Scheme may not be approved at the Scheme Meeting. If this occurs the Scheme will not proceed, you will not receive the VOTING TO APPROVE THE SCHEME Special Dividend or the Scheme Consideration, and you will remain a Shareholder. When and where will the Scheme Meeting be held? However, if the Scheme is approved and implemented, your The Scheme Meeting will be held at 10.00am on 17 September Shares will be transferred to the Australian Holding Company 2009 at the Grand Ballroom, Hilton Sydney, 488 George Street, under the Scheme and you will receive: Sydney. •• the Special Dividend in relation to each Share you hold on the Am I entitled to vote at the Scheme Meeting? Special Dividend Record Date; If you are registered as a Shareholder on the Share Register at •• the Scheme Consideration for each Share you hold on the 7.00pm on 15 September 2009, and you are not an Excluded Scheme Record Date. Shareholder, then you will be entitled to vote at the Scheme Meeting. Kirin and its Related Bodies Corporate will not vote This is so even if you did not vote at all or you voted against at the Scheme Meeting. the Scheme.
What vote is required to approve the Scheme? What happens if the Scheme is not approved at the Scheme Meeting? For the Scheme to proceed, votes ‘in favour’ of the resolution to approve the Scheme at the Scheme Meeting must be received If the Scheme is not approved by a Requisite Majority of from a Requisite Majority of Non-Kirin Shareholders, being: Non-Kirin Shareholders at the Scheme Meeting:
•• unless the Court orders otherwise, a majority in number •• Lion Nathan will remain listed on ASX and NZSX; (more than 50%) of Non-Kirin Shareholders, who are present •• Shareholders will retain their Shares; and voting, either in person or by proxy, attorney, or in the case of a corporation its duly appointed corporate •• Shareholders will not receive the Special Dividend; and representative; and •• Non-Kirin Shareholders will not receive the Scheme Consideration. lion nathan SCHEME BOOKLET 2009
Questions and Answers continued
The Independent Directors believe that if the Scheme is not What if I have other questions? approved then the price of Shares may fall. If you have any other questions about the Scheme, please call the Section 2.11 provides further details on Lion Nathan’s future Lion Nathan Information Line on 1800 211 826 (within Australia), prospects in the event that the Scheme does not proceed. 0800 630 109 (within New Zealand) or +61 2 8986 9354 (outside Australia and New Zealand) between 9.00am and 5.00pm What happens if the Scheme is approved at the Scheme (Sydney time) Monday to Friday, or visit the Lion Nathan website Meeting, but is not approved by the Court? - www.lion-nathan.com. If the Scheme is approved by a Requisite Majority of Non-Kirin Shareholders at the Scheme Meeting, but is not approved by the Court:
•• Lion Nathan will remain listed on ASX and NZSX;
•• Shareholders will retain their Shares;
•• Shareholders will receive the Special Dividend; and
•• Non-Kirin Shareholders will not receive the Scheme Consideration.
The Independent Directors believe that if the Scheme is not approved then the price of Shares may fall.
Section 2.11 provides further details on Lion Nathan’s future prospects in the event that the Scheme does not proceed.
When will the results of the Scheme Meeting be available?
The results of the Scheme Meeting will be available shortly after the conclusion of the Scheme Meeting and will be announced to ASX and NZX once available. The results will also be published on Lion Nathan’s website (www.lion-nathan.com) soon after the Scheme Meeting. limite d 2009
OTHER
nathan Can I keep my shares in Lion Nathan?
If the Scheme is implemented, your Shares will be transferred lion to the Australian Holding Company. This is so even if you did not 8 vote at all or you voted against the Scheme. Can I acquire shares in Kirin?
Kirin is listed on the Tokyo, Osaka, Nagoya, Fukuoka and Sapporo stock exchanges.
Lion Nathan and Kirin make no recommendation as to whether you should purchase shares in Kirin. You should seek independent financial and taxation advice before making any investment decision.
Are any other approvals required?
The Scheme must be approved by the Court in addition to being approved by a Requisite Majority of Non-Kirin Shareholders. If the Scheme is approved by a Requisite Majority of Non-Kirin Shareholders at the Scheme Meeting, Lion Nathan will apply to the Court for approval of the Scheme. The Court hearing for approval of the Scheme is expected to be held on 7 October 2009 (although this may change). Further details of the approval process are set out in Section 2.
Implementation of the Scheme is subject to certain regulatory approvals, as summarised in Section 2.8.
Is the Scheme subject to any conditions?
Implementation of the Scheme is subject to a number of conditions. These conditions are summarised in Section 2.8 and set out in full in the Implementation Agreement (a copy of which is included in Annexure A). LION NATHAN SCHEME BOOKLET 2009
1. Matters relevant to your vote on the Scheme
1.1 Reasons to vote in favour of 1.1.3 You are being offered a substantial the Scheme premium to historical trading prices
The Cash Payments of $12.00 per Share, which will be paid 1.1.1 Your Independent Directors unanimously to Non-Kirin Shareholders if the Scheme is approved and recommend that you vote in favour of the implemented, represent a significant premium to historical Scheme in the absence of a Superior Proposal trading prices.
The Independent Directors believe that the Scheme is in the best HIGHLY ATTRACTIVE PREMIA (A) interests of Non-Kirin Shareholders and unanimously recommend that, in the absence of a Superior Proposal emerging, you vote in favour of the Scheme at the Scheme Meeting. $12.00
In reaching their recommendation, the Independent Directors 48.3% 54.4% 50.3% 49.0% have assessed the Scheme having regard to the reasons to vote $10.00 in favour of, or against, the Scheme, as set out in this Scheme Booklet, and Lion Nathan’s current strategic plans.
The Independent Directors believe that the offer is highly attractive and provides an opportunity for you to realise cash $8.09 $7.7 7 $7.98 $8.05 value in the near term which may not be achieved if the Scheme does not proceed. $5.00 Each Independent Director intends to vote the Shares that they Adjusted Adjusted Adjusted Adjusted Last Closing 1 Month 3 Month 6 Month own or control, and will direct any Lion Nathan proxies placed at Price on VWAP prior VWAP prior VWAP prior their discretion, in favour of the Scheme in the absence of a 22 April to 22 April to 22 April to 22 April Superior Proposal emerging. The interests of the Independent
Directors in Shares are set out in Section 6.6. A. The ASX cum-dividend share prices and VWAP have been adjusted for Lion Nathan’s Interim Dividend of $0.22 per Share paid on 23 June 2009 by deducting the $0.22 per Share from each of the reference prices 1.1.2 The Independent Expert has concluded calculated on 22 April 2009 (the day prior to Lion Nathan’s that the Scheme is fair and reasonable and in announcement of the receipt of Kirin’s proposal). The reference prices limite d 2009 the best interests of Non-Kirin Shareholders are as follows: last closing price on Wednesday 22 April 2009 of $8.31, one month VWAP up to and including 22 April 2009 of $7.99, 3 month The Independent Expert, Lonergan Edwards & Associates VWAP up to and including 22 April 2009 of $8.20 and 6 month VWAP up
Limited, has concluded that “the acquisition of Lion Nathan to and including 22 April 2009 of $8.27 per Share. nathan shares by Kirin under the Scheme is fair and reasonable and in The Cash Payments of $12.00 per Share are also significantly lion the best interests of Lion Nathan shareholders”. above the all time high Lion Nathan closing share price of $9.852 9 The Independent Expert has valued 100% of the shares in on 4 February 2008. Lion Nathan on a controlling interest basis at between A$10.95 to The Independent Expert acknowledges that “The Cash Payments A$12.21 per Share, which compares with the Cash Payments of represent a significant premium to the recent market prices of A$12.00 per Share.1 Lion Nathan shares prior to the announcement of the initial Annexure D of this Scheme Booklet contains a copy of the approach by Kirin (on 23 April 2009) and are higher than any Independent Expert’s Report. The Independent Directors Lion Nathan closing share price”. encourage that you read this report in its entirety. The Independent Expert also states that “the premium exceeds observed premiums generally paid to target company INDEPENDENT EXPERT VALUATION RANGE shareholders in comparable circumstances”.
$13.00 1.1.4 The Cash Payments of $12.00 per Share compares favourably to historical precedent transactions $12.00 $12.00
$11.58 The Cash Payments of $12.00 per Share represent implied multiples of earnings which are above average Australian and international historical precedent transaction multiples, as $11.00 considered by the Independent Expert, Lonergan Edwards & Associates Limited, in the Independent Expert’s Report. These are highlighted in the chart below and set out in full in Annexure D $10.00 of this Scheme Booklet: Mid-point of Total Cash Independent Payments Expert’s Assessed Value Range
1. Please refer to paragraph 227 of the Independent Expert’s Report (set out in Annexure D) for further details on valuation on a 100% controlling interest basis.
2. Based on trading up to and including Wednesday 22 April 2009 (the day prior to Lion Nathan’s announcement of the receipt of Kirin’s proposal). lion nathan SCHEME BOOKLET 2009
1. Matters relevant to your vote on the Scheme continued
1.1.6 No alternative proposal has emerged as at HISTORICAL PRECEDENT MULTIPLES the date of this Scheme Booklet
15.0x The Implementation Agreement does not prevent a third party 1 4 .1 x from making an alternative proposal or Lion Nathan soliciting 12.8x other offers, nor does it include a break-fee. Since the 11.7x announcement by Lion Nathan of the Independent Directors’ recommendation of Kirin’s proposal on 27 April 2009, the Kirin 10.0x proposal has been widely publicised, and no alternative proposal has emerged.
Given the time that has elapsed since the announcement of the Independent Directors’ recommendation of the Kirin proposal 5.0x on 27 April 2009, and the fact that Kirin currently holds 46.13% Average Implied Implied of Lion Nathan, it is the view of the Independent Directors that beer company FY09 FY08 an alternative proposal is unlikely to emerge prior to the transactions A multiple B multiple C Scheme Meeting.
A. Based on 35 Australasian and international beer company transactions This is supported by the Independent Expert: “there is no since 1998. realistic likelihood that a competing offer for Lion Nathan shares will be received prior to the Scheme meeting”. B. Based on an implied enterprise value of $8,334.6m comprising an implied equity value of $6,410.9m, net debt of $1,923.2m (based on net debt as at 31 March 2009 of $1,650.3m, the Interim Dividend of $117.5m 1.1.7 The Lion Nathan share price may fall if the and capital expenditure of $155.4m expected to be incurred from 1 April 2009 to 30 September 2009 based on the mid-point of Lion Nathan’s Scheme is not approved full year FY09 capital expenditure guidance range of $225m to $275m and The Cash Payments represent a premium of approximately capital expenditure for the six months to 31 March 2009 of $94.6m), 54.4% to the 1 month adjusted VWAP of Shares prior to the minority interests of $0.5m and broker consensus forecast FY09 EBITDA (pre significant items) of $650.3m as at 30 July 2009. proposal being announced.
Based on an implied enterprise value of $8,334.6m comprising an implied equity value of $6,410.9m, net debt of $1,923.2m (based on net LION NATHAN ASX SHARE PRICE debt as at 31 March 2009 of $1,650.3m, the Interim Dividend of $117.5m and capital expenditure of $155.4m expected to be incurred from 1 April $13.00 2009 to 30 September 2009 based on the mid-point of Lion Nathan’s full CASH PAYMENTS - $12.00 year FY09 capital expenditure guidance range of $225m to $275m and $12.00 capital expenditure for the six months to 31 March 2009 of $94.6m), Lion Nathan all-time high
lion nathan lion li m it e d nathan 2009 minority interests of $0.5m and FY08 actual EBITDA (pre significant closing share price - $9.85 $11.00 (pre announcement of Kirin proposal) items) of $592m. 10 $10.00 1.1.5 The Special Dividend will be fully franked $9.00 with Australian franking credits and partly imputed utilising available New Zealand $8.00 imputation credits which may have incremental One Month Adjusted VWAP - $7.77 value for certain Shareholders $7.00 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 If the Scheme is approved by a Requisite Majority of Non-Kirin Shareholders at the Scheme Meeting, Shareholders will receive a Special Dividend of $0.50 in relation to each Share they hold as A. The ASX adjusted one-month VWAP of $7.77 per Share has been adjusted for Lion Nathan’s Interim Dividend of $0.22 per Share paid on at the Special Dividend Record Date (whether or not the Scheme 23 June 2009 by deducting the $0.22 per Share from the cum-dividend is approved by the Court). one month VWAP of $7.99 per Share calculated on 22 April 2009 (the The Special Dividend will be fully franked with Australian franking day prior to Lion Nathan’s announcement of the receipt of Kirin’s credits and partly imputed utilising available New Zealand proposal). Note that the Lion Nathan ASX share price in the graph has not been adjusted to reflect dividend payments during the period from imputation credits which may have incremental value for certain 23 April 2007 to 22 April 2009. Shareholders. If the Special Dividend is paid within three months of being determined, as is intended, NZD0.29 imputation credits Lion Nathan’s share price rose significantly following the will be attached to the $0.50 Special Dividend (which itself will announcement by Lion Nathan of the Independent Directors’ be converted to NZD in accordance with Section 2.7). If the recommendation of Kirin’s offer on 27 April 2009. Special Dividend is not paid within three months of being The Independent Directors believe that if the Scheme is not determined, the exact amount of New Zealand imputation credits approved and no Superior Proposal emerges, the Lion Nathan that can be attached to the Special Dividend will depend on the share price may trade at levels below the price at which it has exchange rate between Australia and New Zealand when the traded since 27 April 2009 (although this is difficult to predict Special Dividend is paid. with any degree of certainty). Shareholders should refer to Section 5 for further details and The Independent Expert agrees with this conclusion, stating the consult their own taxation adviser to determine the tax following: “If the Scheme does not proceed, and in the absence consequences relevant to their individual circumstances. of an alternative offer or proposal, the price of Lion Nathan If the Scheme is not approved by a Requisite Majority of shares is likely to trade at a significant discount to our valuation Non-Kirin Shareholders at the Scheme Meeting, the Special and the Cash Payments”. Dividend will not be paid by Lion Nathan. LION NATHAN SCHEME BOOKLET 2009
1.1.8 If implemented, the Scheme provides you 1.2.3 If the Scheme proceeds, Non-Kirin with the value and certainty of cash in this Shareholders will not participate in future uncertain environment dividends of Lion Nathan (other than the
If implemented, the Cash Payments of $12.00 per Share offered Special Dividend) to relevant Shareholders provide certainty of value and timing. Some Non-Kirin Shareholders may prefer Lion Nathan to remain Specifically, if all conditions and approvals for the Scheme are independently listed on ASX and NZSX and continue to receive satisfied or waived, as applicable, relevant Shareholders will dividends from their Shares. receive $12.00 per Share in cash, in the form of: As with all investments in securities, there can be no guarantee •• a Special Dividend of $0.50 in relation to each Share held by as to Lion Nathan’s future financial performance or the level of a Shareholder as at the Special Dividend Record Date, dividends that Non-Kirin Shareholders may receive. expected to be paid on or about 6 October 2009; and If the Scheme is not approved by a Requisite Majority of •• the Scheme Consideration of $11.50 for each Share held by Non-Kirin Shareholders, the Special Dividend will not be paid. a Non-Kirin Shareholder as at the Scheme Record Date, expected to be paid on or about 21 October 2009. 1.2.4 The tax consequences of the Scheme In contrast, if the Kirin proposal does not proceed, the amount for you may not be optimal for your financial which Non-Kirin Shareholders will be able to realise for their position Shares (in terms of price) and from their Shares (by way of Implementation of the Scheme may trigger taxation implications for future dividends), will necessarily be uncertain. Among other Non-Kirin Shareholders. Non-Kirin Shareholders should read the things, this will be subject to the performance of Lion Nathan’s taxation considerations outlined in Section 5 and seek professional business from time to time, general economic conditions and taxation advice with respect to their individual tax situations. movements in the share market, which has been highly volatile in recent times. The Kirin proposal removes this uncertainty for Non-Kirin Shareholders should take into account that they Non-Kirin Shareholders. may sell their Shares on ASX or NZSX at any time prior to the Effective Date if they do not wish to hold them and participate in 1.1.9 No brokerage or stamp duty will be payable the Scheme (although normally brokerage expenses on sale will be incurred). Certain Non-Kirin Shareholders’ individual financial by you on the transfer of your Shares or taxation circumstances may make it preferable for them to do limite d 2009 You will not incur any brokerage or stamp duty on the transfer so. You should seek your own professional advice regarding any of your Shares to the Australian Holding Company pursuant to decision with respect to your Shares. the Scheme. nathan 1.3 Other considerations 1.2 Possible reasons not to vote in lion 11 favour of the Scheme 1.3.1 Shareholders may sell their Shares on ASX or NZSX at any time prior to the suspension of 1.2.1 You may disagree with the Independent Shares from trading
Directors and the Independent Expert and believe Shareholders should take into account that they may sell their that the Scheme is not in your best interests Shares on ASX or NZSX at any time prior to the suspension You may disagree with the Independent Directors and the of Shares from trading if they do not wish to hold them and findings of the Independent Expert which have concluded that participate in the Scheme (although normal brokerage expenses the Scheme is fair and reasonable and in the best interests of on sale will be incurred). The Shares are expected to be Non-Kirin Shareholders. suspended from trading on ASX and NZSX from close of trading on the Effective Date. Certain Shareholders’ individual financial In particular, you may believe that Lion Nathan will deliver greater or taxation circumstances may make it preferable for them to returns over the long term by remaining an independent company. do so. Shareholders should seek their own professional advice regarding any decision with respect to their Shares. 1.2.2 If the Scheme proceeds you will no longer be a shareholder of Lion Nathan and you will 1.4 Effect of the Scheme not participate in any potential upside that may Details of the effect of the Scheme on Shareholders are set out result from being a shareholder of Lion Nathan in Section 2 of this Scheme Booklet. If the Scheme is approved and implemented, you will cease to hold an interest in Lion Nathan and as such you will no longer be able to participate in Lion Nathan’s future financial performance or the future prospects of its ongoing business. As with all investments in securities, there can be no guarantee as to Lion Nathan’s future performance.
If the Scheme is approved and implemented, Lion Nathan will be removed from the official list of ASX and will cease to be listed on NZSX. Following delisting, investors will no longer be able to acquire or trade Shares on the ASX or NZSX. lion nathan SCHEME BOOKLET 2009
2. Details of the Scheme
2.1 Acquisition of Shares by Scheme of (c) the Non-Kirin Shares will be transferred to the Australian Arrangement Holding Company;
On 27 April 2009, Lion Nathan and Kirin announced the key (d) Lion Nathan will become a wholly-owned subsidiary of the commercial terms under which Kirin proposed to acquire all Australian Holding Company; and of the remaining issued share capital of Lion Nathan for an offer (e) Lion Nathan will be removed from the official list of ASX and consideration of $12.22 per Share. will cease to be listed on NZSX. Under the agreed terms, the offer consideration would The detailed terms of the Scheme are set out in Annexure B. comprise: In support of its obligations to pay the Scheme Consideration (a) Scheme Consideration of $11.50 per Share; and under the Implementation Agreement, Kirin has executed the Deed Poll in favour of Non-Kirin Shareholders (see Annexure C). (b) fully franked dividends of $0.72 per Share, comprising: 2.4 Payment of Special Dividend (i) an Interim Dividend of $0.22 per Share; and If the Scheme is approved by a Requisite Majority of Non-Kirin (ii) a Special Dividend of $0.50 per Share. Shareholders at the Scheme Meeting, all Shareholders (including The Interim Dividend of $0.22 was paid on 23 June 2009 and Kirin or the Australian Holding Company) will be paid the Special as such the total Cash Payments to be paid to relevant Dividend in respect of each Share held by them as at the Special Shareholders if the Scheme is approved and implemented will be, Dividend Record Date, which will be paid no later than the in aggregate, $12.00 per Share. Business Day before the Second Court Date.
The Scheme Consideration of $11.50 will be reduced by the If the Scheme is not approved by a Requisite Majority of amount of any dividends or distributions declared or announced Non-Kirin Shareholders at the Scheme Meeting, the Special by Lion Nathan prior to the Implementation Date, other than the Dividend will not be paid. Special Dividend and the Interim Dividend. There is no current Lion Nathan has, through the Independent Directors, intention to declare, announce or pay any dividend or distribution determined that the payment of the Interim Dividend and the other than the Special Dividend. Special Dividend does not materially prejudice the interests of Lion Nathan and Kirin entered into an Implementation Agreement Lion Nathan or its Shareholders, or Lion Nathan’s ability to pay on 10 May 2009, a copy of which is included in Annexure A. its creditors. Please refer to Section 6.2. Under the Implementation Agreement, the acquisition is limite d 2009 2.5 Payment of Scheme Consideration proposed to be implemented under a scheme of arrangement. If the Scheme becomes Effective, all Non-Kirin Shareholders 2.2 Approvals required from Non-Kirin will be paid the Scheme Consideration in respect of each Share
nathan Shareholders and the Court held by them as at the Scheme Record Date, which will be paid For the Scheme to take effect, section 411(4) of the Corporations as follows: lion Act requires a meeting of Shareholders to be held, at which the (a) no later than 2 Business Days before the Implementation Scheme must be agreed to by a resolution passed by a majority 12 Date, the Australian Holding Company will pay the total in number of Non-Kirin Shareholders present and voting (either Scheme Consideration into a special purpose trust account; in person or by proxy) at the Scheme Meeting and representing and in aggregate not less than 75% of the votes cast on the resolution at the Scheme Meeting. Kirin and its Related Bodies (b) within 5 Business Days after the Implementation Date, Corporate will not vote at the Scheme Meeting. The result of the Lion Nathan will pay the Scheme Consideration to Non-Kirin Scheme Meeting must then be provided to the Court, which will Shareholders. consider whether or not to approve the Scheme. If the Scheme does not proceed to implementation, the Scheme On 5 August 2009, the Court made the requisite orders Consideration will not be paid. that the Scheme Meeting be convened and that this Scheme 2.6 Method of payment Booklet be despatched to Shareholders. The orders made by the Court convening the Scheme Meeting do not constitute an Subject to Section 2.7, the Special Dividend and (unless endorsement of, or any other expression of opinion on, the otherwise directed by the Scheme Participant before the Scheme or this Scheme Booklet. Scheme Record Date) the Scheme Consideration will be paid: 2.3 What will happen under the Scheme? (a) if a Shareholder has a payment direction for an Australian or New Zealand bank account recorded with the Share If the Scheme is approved by Non-Kirin Shareholders and Registry as at the relevant record date for that payment, the Court (as discussed in Section 2.2), and subject to the by direct credit to that account; or satisfaction or waiver of the conditions set out in Section 2.8, all Non-Kirin Shareholders who hold Shares as at the Scheme (b) otherwise, by cheque drawn in Australian currency sent Record Date will participate in the Scheme, whether or not they to the Shareholder by pre-paid post to their address as voted for the Scheme (and even if they voted against the Scheme). recorded in the Share Register as at the relevant record date for that payment. If the Scheme is approved and implemented: 2.7 Payments to New Zealand Shareholders (a) each Shareholder will receive the Special Dividend in relation to each Share held by them as at the Special Dividend If you have a payment direction for a New Zealand bank account Record Date; recorded with the Share Registry as at the Special Dividend Record Date, you will be paid your Special Dividend in (b) each Non-Kirin Shareholder will receive the Scheme New Zealand currency. If you have a payment direction for a Consideration in exchange for each Share held by them New Zealand bank account recorded with the Share Registry as at the Scheme Record Date; as at the Scheme Record Date, you will be paid your Scheme LION NATHAN SCHEME BOOKLET 2009
Consideration in New Zealand currency. All other Shareholders (h) no Lion Nathan “Material Adverse Event” having occurred, will receive the Special Dividend and Scheme Consideration meaning events which individually, or when aggregated with in Australian currency. other events, have resulted in, or could reasonably be expected to result in: Payments in New Zealand currency will involve conversion from Australian currency into New Zealand currency. For the Special (i) the value of the consolidated net assets of the Dividend, the exchange rate for conversion will be established Lion Nathan group being reduced by $90 million or within two Business Days after the Special Dividend Record Date more; or - which is expected to be 7.00pm on 25 September 2009, which (ii) the value of consolidated annual NPAT of the is approximately 11 days before the scheduled date for payment Lion Nathan group being reduced by $30 million or more. of the Special Dividend. For the Scheme Consideration, the exchange rate for conversion will be established within two In this context, the type of “event” which can give rise to Business Days after the Scheme Record Date - which is a Lion Nathan Material Adverse Event includes an event, expected to be 7.00pm on 14 October 2009, which is occurrence or matter that: approximately 7 days before the estimated date for payment of (iii) has occurred or fails to occur after the date of the the Scheme Consideration. Implementation Agreement (being 10 May 2009); New Zealand Shareholders will carry full exchange rate risk (iv) has occurred or fails to occur before the date of relating to any changes in the Australian dollar-New Zealand the Implementation Agreement, but is only publicly dollar exchange rate following the time the exchange rate for announced or disclosed to Kirin after the date of conversion of the Special Dividend and Scheme Consideration the Implementation Agreement; or is established. When the Special Dividend and the Scheme Consideration are actually paid in New Zealand currency those (v) will or is likely to occur after the date of the amounts may be worth less (or more) than the Australian dollar Implementation Agreement, and has not been publicly amount at the time the exchange rate for conversion was announced or disclosed to Kirin before the date of the established. Implementation Agreement;
2.8 What conditions must be satisfied before the but excludes: Scheme can proceed? (vi) any announcement, decision, determination, proposed The implementation of the Scheme is subject to a number of change to legislation or regulations, or ruling issuing by conditions which are set out in clause 3.1 of the Implementation a regulatory authority (including in relation to tax) which Agreement (contained in Annexure A). As at the date of this does not specifically relate to Lion Nathan’s business; limite d 2009 Scheme Booklet, implementation of the Scheme remains (vii) any declaration or determination relating to, or payment conditional on:
of, the Interim Dividend or Special Dividend; or nathan (a) NZCC not having commenced or threatened to commence (viii) the de-recognition of any tax losses that arise from the proceedings in relation to Kirin’s acquisition of the Non-Kirin lion acquisition of the Non-Kirin Shares by Kirin. Shares, or having given clearance or granting authorisation 13 to the acquisition; On 18 June 2009, Kirin received confirmation from FIRB that it had no objections to Kirin’s proposed acquisition of the (b) ASIC and ASX issuing or providing such consents, waivers, remaining Shares that it does not already hold. modifications, and/or approvals or doing such other acts which are necessary or which Lion Nathan and Kirin agree On 26 June 2009, Kirin received confirmation from ACCC that are reasonably desirable to implement the Scheme; it did not propose to intervene in Kirin’s proposed acquisition of the remaining Shares that it does not already hold. (c) no order, injunction, decree, ruling or other action restraining or otherwise imposing a legal restraint or prohibition having On 13 July 2009, Kirin received confirmation from the been issued by the Court or other regulatory authority (such New Zealand OIO that consent had been granted to Kirin’s as the ACCC and NZCC) preventing the implementation of proposed acquisition of the remaining Shares that it does not any material aspect of the Scheme or payment of the already hold. Special Dividend; On 5 August 2009, the Independent Expert, Lonergan Edwards & (d) approvals from all relevant Australian regulatory authorities Associates Limited, issued the Independent Expert’s Report (set (other than a tax authority) which Kirin and Lion Nathan out in Annexure D) which concluded that the Scheme is in best agree, acting reasonably, are necessary to implement any interests of Non-Kirin Shareholders. material aspect of the Scheme or payment of the Special Other than as set out above and in Section 6.17, no other Dividend; regulatory approvals are required. (e) approval of the Scheme by a Requisite Majority of Non-Kirin The Scheme will become binding on Lion Nathan and each Shareholders at the Scheme Meeting; Non-Kirin Shareholder upon the Court making an order under (f) approval of the Scheme by the Court in accordance with section 411(4)(b) of the Corporations Act and that order being section 411(4)(b) of the Corporations Act; lodged with ASIC and becoming effective under section 411(10) (that is, on the Effective Date). (g) the representations and warranties given respectively by Lion Nathan and Kirin as set out in the Implementation 2.9 What will happen if the Scheme is not Agreement remaining true and correct in all material approved at the Scheme Meeting? respects as at the date of the Implementation Agreement If the Scheme is not approved by a Requisite Majority of (being 10 May 2009) and 8.00am on the Second Court Non-Kirin Shareholders at the Scheme Meeting: Date; and •• Lion Nathan will remain listed on ASX and NZSX; lion nathan SCHEME BOOKLET 2009
2. Details of the Scheme continued
•• Shareholders will retain their Shares; B). Pursuant to clause 8.4 of the Scheme, each Non-Kirin Shareholder will be deemed to have warranted that: •• Shareholders will not receive the Special Dividend; and (a) all of their Shares (including any rights and entitlements •• Non-Kirin Shareholders will not receive the Scheme attaching to those shares excluding any entitlement to Consideration. receive the Special Dividend or the Interim Dividend) The Independent Directors believe that if the Scheme is not transferred will, on the date of the transfer of them to approved, then the price of Shares may fall. the Australian Holding Company under the Scheme, be fully paid and free from all mortgages, charges, liens, 2.10 What will happen if the Scheme is approved encumbrances, pledges, security interests and other at the Scheme Meeting, but the Scheme is not interests of third parties of any kind, whether legal or approved by Court? otherwise, and restrictions on transfer of any kind; and •• Lion Nathan will remain listed on ASX and NZSX; (b) they have the full power and capacity to sell and transfer •• Shareholders will retain their Shares; their Shares (including any rights and entitlements attaching to those shares). •• Shareholders will receive the Special Dividend; and 2.13 No encumbrances on transfer of Shares to •• Non-Kirin Shareholders will not receive the Scheme the Australian Holding Company Consideration. Non-Kirin Shareholders’ attention is drawn to clause 8.5 The Independent Directors believe that if the Scheme is not of the Scheme (see Annexure B) which provides that, to the approved, then the price of Shares may fall. extent permitted by law, all Shares (including any rights and 2.11 If the Scheme does not proceed entitlements attaching to those Shares excluding any entitlement to receive the Special Dividend or the Interim Dividend) which If the Scheme does not proceed, the Directors intend to continue are transferred to the Australian Holding Company under the to operate Lion Nathan as a listed public company carrying Scheme will, at the date of the transfer of them to the Australian on the business of producing, marketing and distributing Holding Company, vest in the Australian Holding Company free alcoholic beverages under the leadership of the current from all mortgages, charges, liens, encumbrances and interests senior management of Lion Nathan. Accordingly, Lion Nathan of third parties of any kind, whether legal or otherwise, and free will continue to pursue its operational and strategic growth from any restrictions on transfer of any kind not referred to in objectives focused on the creation of value for all Lion Nathan limite d 2009 the Scheme. Shareholders. The Board has not formed any plans to make any significant changes to the business of Lion Nathan, redeploy any of its operating assets, or change or affect the future nathan employment of the present employees of Lion Nathan.
lion The Independent Directors have confidence in Lion Nathan’s future as an independent entity, and its ability to maintain sound 14 earnings and balance sheet growth in the current economic circumstances.
Despite the confidence of the Independent Directors in the future of Lion Nathan as an independent entity if the Scheme does not proceed, they nonetheless believe that the Scheme is in the best interests of Non-Kirin Shareholders, in the absence of a Superior Proposal. As at the date of this Scheme Booklet, no Superior Proposal has emerged. Given the time that has elapsed since the announcement of the Independent Directors’ recommendation of the Kirin proposal on 27 April 2009, and the fact that Kirin currently holds 46.13% of Lion Nathan, it is the view of the Independent Directors that a Superior Proposal is unlikely to emerge prior to the Scheme Meeting.
In the event that the Scheme is not approved by Non-Kirin Shareholders at the Scheme Meeting, it is currently expected that the Board will follow its normal dividend policy in relation to the determination of a final dividend for 2009. If the Special Dividend is paid, but the Scheme is not approved by Court, no final dividend for 2009 will be paid.
The Independent Directors believe that if the Scheme is not approved, then the price of Shares may fall.
For further details, please refer to paragraph 173 of the Independent Expert’s Report (set out in Annexure D). 2.12 Deemed warranty on transfer of Shares to the Australian Holding Company
Non-Kirin Shareholders’ attention is drawn to the warranties that Non-Kirin Shareholders will be deemed to have given if the Scheme takes effect, in clause 8.4 of the Scheme (see Annexure LION NATHAN SCHEME BOOKLET 2009
3. Information on Lion Nathan
3.1 Lion Nathan Group As at 31 March 2009 Lion Nathan Wine:
Lion Nathan is a premium alcoholic beverages company with •• accounted for 11% of Lion Nathan’s total assets (excluding operations in Australia and New Zealand. Lion Nathan is listed corporate and unallocated assets); on both ASX and NZSX. •• accounted for 1% of Lion Nathan’s EBIT (excluding For the six months to 31 March 2009, Lion Nathan reported corporate); and sales revenue of $1,185.3 million and EBIT of $307.0 million and •• employed the equivalent of approximately 500 people NPAT of $176.0 million. full time. 3.2 Operations 3.3 Directors and senior management 3.2.1 Australia The current directors of Lion Nathan are: Lion Nathan’s Australian business (Lion Nathan Australia) •• Mr Geoff Ricketts - Chairman produces, markets, sells and distributes a leading range of beers from five major breweries (one in each of Sydney, Brisbane, •• Mr Glenn Barnes Adelaide, Perth and Launceston), as well as a smaller craft •• Mr Peter Bush brewery in Sydney. •• Mr Hirotake Kobayashi - Kirin Nominee Director As at 31 March 2009 Lion Nathan Australia: •• Mr Senji Miyake - Kirin Nominee Director •• accounted for 74% of Lion Nathan’s total assets (excluding corporate and unallocated assets); •• Mr Fumio Miki - Kirin Nominee Director
•• accounted for 85% of Lion Nathan’s EBIT (excluding •• Mr Robert (Rob) Murray - Chief Executive Officer corporate); and •• Mr Andrew Reeves - Managing Director, Lion Nathan •• employed the equivalent of approximately 1,400 people Australia full time. •• Mr Gavin Walker Lion Nathan’s national volume share of the beer market in •• Ms Barbara Ward Australia is approximately 43%. Major brands include Tooheys, XXXX, Hahn, James Squire, James Boag’s, West End Draught, The current senior managers of Lion Nathan are: Emu Bitter and key international agency brands including
•• Mr Robert Murray - Chief Executive Officer limite d 2009 Heineken and Beck’s. •• Mr Bob Barbour - People and Culture Director Lion Nathan Australia participates in the spirits and ‘ready to drink’
(RTD) market through its McKenna and Inner Circle brands and •• Mr Peter Kean - Managing Director, Lion Nathan New Zealand nathan its 50% share in the Bacardi Lion joint venture which distributes •• Mr Duncan Makeig - General Counsel and Company a range of Bacardi and Lion Nathan brands. As part of the joint lion Secretary venture agreement, Lion Nathan Australia provides manufacturing 15 and back office support to the joint venture. •• Mr Rob McKenzie - Group Technical and Operations Director
3.2.2 New Zealand •• Mr Andrew Reeves - Managing Director, Lion Nathan Australia Lion Nathan’s New Zealand business (Lion Nathan New Zealand) produces, markets, sells and distributes a •• Mr Anthony Roberts - Managing Director, Lion Nathan Wine leading range of alcoholic beverages including beer from three •• Mr Jamie Tomlinson - Chief Financial Officer major breweries (Auckland, Christchurch and Dunedin) as well as two smaller breweries, plus a contract packing company If the Scheme does not proceed, the current senior management bottling international and local spirits and RTD brands. In of Lion Nathan will remain. If the Scheme is approved, the addition, Lion Nathan New Zealand distributes a range of owned intentions of Kirin in relation to employees generally is set out and agency fine wine brands led by the Wither Hills brand. in Section 4.5.6 below.
As at 31 March 2009 Lion Nathan New Zealand: 3.4 Availability of documents relating to Lion Nathan •• accounted for 15% of Lion Nathan’s total assets (excluding corporate and unallocated assets); The full statutory interim results for the 6 months ended 31 March 2009 were provided to ASX on 20 May 2009. Shareholders who •• accounted for 14% of Lion Nathan’s EBIT (excluding would like to receive a copy of the interim results may request corporate); and one by calling +61 2 9290 6640. This document is also available on •• employed the equivalent of approximately 1,000 people Lion Nathan’s website (www.lion-nathan.com). full time. As an ASX listed company and a ‘disclosing entity’ under the 3.2.3 Wine Corporations Act, Lion Nathan is subject to regular reporting and disclosure obligations. Broadly, these require Lion Nathan The Lion Nathan wine business (Lion Nathan Wine) produces to announce price sensitive information to ASX as soon as some of Australasia’s finest wines from South Australia, Victoria, it becomes aware of the information, subject to exceptions Western Australia and the Marlborough region in New Zealand. for certain confidential information. A list of the announcements It also owns the Argyle winery in Oregon, USA. The Lion Nathan made to ASX in relation to Lion Nathan since 31 March 2009 Group also distributes a portfolio of fine wines from a wider and before the lodgement for registration of this Scheme Australian and New Zealand geography as well as from Booklet by ASIC is included in Annexure E. A copy of these renowned wine regions in France, Italy and South Africa. announcements can be accessed on Lion Nathan’s website (www.lion-nathan.com) or obtained by calling +61 2 9290 6640. lion nathan SCHEME BOOKLET 2009
Additionally, copies of documents lodged with ASIC in relation Dividend Record Date, Lion Nathan intends to grant additional to Lion Nathan may be obtained from, or inspected at, an Achievement Rights under the Achievement Rights Plan in ASIC Service Centre. Please note that ASIC may charge a fee in relation to the Achievement Period ending 30 September 2009, respect of such services. subject to an assessment of performance for the Achievement Period ending 30 September 2009 against the applicable 3.5 Capital structure Achievement Targets for the relevant participants at that time. As at 30 July 2009 there were 534,240,495 Shares on issue. It is the current intention of the Board to satisfy any obligation to In addition, as at 30 July 2009 Lion Nathan has 1,481,649 allocate Shares in relation to the exercise of Achievement Rights Achievement Rights on issue under the Achievement Rights Plan. through the transfer of Shares. If the Scheme is approved by a Requisite Majority of Non-Kirin Please refer to Section 6.12.2. Shareholders at the Scheme Meeting then, prior to the Special
range of lion nathan shareholders
SIZE OF HOLDING NO. OF SHAREHOLDERS NO. OF SHARES % OF ISSUED CAPITAL
0 - 1,000 7,096 3,426,639 0.640
1,001 - 5,000 6,023 14,547,323 2.720
5,001 - 10,000 1,022 7,521,388 1.410
10,001 - 100,000 617 14,932,937 2.800
100,001 - and over 68 493,812,208 92.430 limite d 2009
Total 14,826 534,240,495 100.00 nathan
lion 3.6 Credit rating The VWAPs of Shares on ASX for the one, three and six month periods prior to 22 April 2009 were $7.99, $8.20 and $8.27 16 Lion Nathan currently has a BBB rating assigned by Standard & respectively. Poor’s, Baa2 by Moody’s and BBB+ by Fitch. The ratings were all placed on positive watch following Lion Nathan’s announcement Since the time of the prices referred to above, Lion Nathan has of the receipt of Kirin’s proposal on 23 April 2009. Standard paid an Interim Dividend of $0.22 per Share. The Interim Dividend & Poor’s subsequently announced on 1 July 2009 that was paid on 23 June 2009. Lion Nathan’s ratings could be raised to ‘A-’ if Kirin receives The current price of Shares on ASX can be obtained from the all necessary approvals to acquire 100% of Lion Nathan. ASX website (www.asx.com.au) or Lion Nathan’s website 3.7 Recent share price history (www.lion-nathan.com). Lion Nathan’s current share price on NZSX can be obtained from the NZX website (www.nzx.com) The latest recorded price of Shares on ASX before the public or Lion Nathan’s website (www.lion-nathan.com). announcement of key commercial terms on 27 April 2009 was $8.31. The latest recorded price of Shares on ASX on 30 July 2009 was $11.71. LION NATHAN SCHEME BOOKLET 2009
4. Information on Kirin
4.1 Kirin Group •• Pharmaceuticals: Pharmaceuticals accounted for 7.4% of Kirin’s total sales in the 2008 financial year. Kirin 4.1.1 Kirin Holdings Company, Limited (Kirin) operates in the pharmaceuticals business through its 50.1% Kirin is a Japanese-listed company and is one of the leading food share in the Japanese company Kyowa Hakko Kirin Co., Ltd. and beverage manufacturers in Asia and Oceania. Kirin, through (Kyowa Hakko Kirin). Kyowa Hakko Kirin is engaged in its various group companies, operates in an extensive range of the manufacturing and marketing of medical products and businesses from alcoholic beverages and soft drinks to dairy pharmaceuticals. As the parent company of the Kyowa Hakko foods, health foods and pharmaceuticals. Kirin group, Kyowa Hakko Kirin manages the group’s business activities in the bio-chemicals and chemicals segments, with Kirin is listed on the Tokyo, Osaka, Nagoya, Fukuoka and the pharmaceuticals segment being its core business. Sapporo stock exchanges, and has a market capitalisation of approximately $17.7 billion3. Kirin’s head office is located •• Seasonings: Through Kirin Kyowa Foods Company, Kirin in Tokyo, Japan. It has an extensive overseas network of develops and provides seasonings and food ingredients subsidiaries and affiliates. As at 31 December 2008, Kirin had by leveraging its extensive experience in fermentative 371 consolidated subsidiaries, 1 unconsolidated subsidiary and production technologies. Kirin Kyowa Foods Company aims 26 affiliate companies Kirin( Group). The Kirin Group currently to develop new food ingredients and to play a part in Kirin’s employs approximately 36,500 people worldwide. targeted business expansion, through finding advanced new uses for yeast and other means. In the financial year ended 31 December 2008, the consolidated Kirin Group generated total sales of approximately JPY2,304 •• Agribio: Kirin operates in the agribio industry through its wholly billion ($29.4 billion) and gross profit of JPY910.7 billion owned subsidiary, Kirin Agribio Company, Limited (Kirin ($11.6 billion). Agribio). Kirin Agribio develops superior flowers, potatoes and seedlings, using breeding skills, product development As at 31 December 2008, the consolidated Kirin Group had total capabilities and seedling production technologies. assets of JPY2,620 billion ($33.4 billion) and net assets of JPY1,150 billion ($14.7 billion). •• Food services and other businesses: Kirin operates in the food services industry through its share in Nagano Tomato Co., 4.1.2 History of Kirin’s relationship with Lion Nathan Ltd (Nagano Tomato) which produces a range of products Kirin first acquired shares in Lion Nathan in April 1998 when including tomato juice, soft drinks and tomato ketchup for it purchased a 45% stake. At the time of the acquisition, sale in Japan. Kirin has a 99.4% (indirect and direct) Lion Nathan was a company incorporated in New Zealand shareholding in Nagano Tomato. with businesses operating in New Zealand and Australia. limite d 2009 Further information about Kirin can be found on the Kirin Group’s In 1999 and 2000, Lion Nathan conducted a share buy-back in website (www.kirinholdings.co.jp/english/index.html). which Kirin did not participate. As a result of the share buy-back,
In addition to Kirin’s shareholding in Lion Nathan, Kirin has the nathan Kirin’s shareholding increased to its current level of 46.13%. following interests in Australia:
Kirin currently has 3 nominee directors on the Board of lion •• National Foods Group: National Foods Limited and its Lion Nathan, Senji Miyake, Hirotake Kobayashi and Fumio Miki. subsidiaries (NF Group) are wholly owned by Kirin through 17 4.1.3 Kirin’s business overview the Australian Holding Company.
The main business of Kirin is strategic management and The NF Group is one of Australia’s largest food and beverage oversight of its group companies, and provision of specialised groups, with core activities in milk, fresh dairy foods, juice, services to those companies. The main business segments in soy beverages and specialty cheese. The NF Group has which the Kirin Group operates are as follows: production facilities and sales offices in every Australian state as well as New Zealand, Singapore, Malaysia (ice-cream) and •• Alcohol: Alcohol accounted for 51.3% of Kirin’s total sales Indonesia (juice) and employs approximately 5,000 people. in the 2008 financial year and is the core business of Kirin. The NF Group’s key brands include PURA, Dairy Farmers, Kirin currently sells more than 37% of all beer, happo-shu Moove, Yoplait, Berri, Daily Juice and King Island Dairy. and new genre products consumed in Japan. Kirin also has a 50.1% interest in Mercian Corporation, a leading Japanese •• Kirin Australia: Kirin Australia Pty Ltd (Kirin Australia) wine merchant. Overseas, Kirin has interests in Asia and is a wholly owned subsidiary of Kirin. Kirin Australia is Oceania through its 48.3% investment in San Miguel Brewery, independent from Kirin’s other business operations in Inc. (Philippines), 46.13% shareholding in Lion Nathan and Australia. Kirin Australia’s main business is the manufacture wholly-owned subsidiary, Kirin (China) Investment Co., Ltd. and sale of barley and malts, primarily to Japan and South Kirin’s initiatives in China include construction of a new beer East Asia. brewery in Zhuhai City in the Pearl River Delta region, and alliances with leading local breweries in the Yangtze River Delta area and Northeast China.
•• Soft Drinks: Soft Drinks accounted for 31.1% of Kirin’s total sales in the 2008 financial year. Kirin operates in this segment through its Japanese subsidiary company, Kirin Beverage Company, Limited (Kirin Beverage). Kirin Beverage is Japan’s 3. Based on Kirin’s market capitalisation of JPY1388 bn, translated at an third-largest soft drinks company. exchange rate of A$:JPY78.44 as at 30 July 2009. The $ amounts in this Section 4 have been stated on the basis of a $A/JPY exchange rate of 78.44 and they are accurate as of 30 July 2009. lion nathan SCHEME BOOKLET 2009
4. Information on Kirin continued
4.1.4 Directors of Kirin As at the date of this Scheme Booklet, Kirin has not determined the actual proportion in which funds will be drawn from its cash The current directors of Kirin are: reserves and the Facility. •• Kazuyasu Kato - President and CEO The Australian Holding Company is of the opinion that it has a •• Kazuhiro Sato - Executive Vice President reasonable basis for forming the view, and it holds the view, that it will have sufficient funds to meet its payment obligations under •• Senji Miyake - Executive Vice President the Scheme. •• Etsuji Tawada - Managing Director Lion Nathan Shareholders may have seen some recent media •• Yoshiharu Furumoto - Managing Director speculation in relation to a potential merger between Kirin and Suntory Holdings Limited. Kirin and Suntory Holdings Limited are •• Yuji Owada - Managing Director at a very preliminary stage of business merger discussions and •• Yuzuru Matsuda - Director no agreement has been reached. Kirin is confident that if any agreement was reached in relation to a merger between Kirin •• Satoru Kishi - Director and Suntory Holdings Limited, this would not give rise to any •• Akira Genma – Director impact on Kirin’s ability to pay the Scheme Consideration to Non-Kirin Shareholders. 4.2 Rationale for Kirin’s proposed acquisition of Lion Nathan Kirin will not be funding any payments associated with the Special Dividend. Any such payments will be made by Full ownership of Lion Nathan is consistent with Kirin’s long term Lion Nathan. growth strategy of becoming a leading company in the areas of beverages, food and health across Asia and Oceania. It is also 4.4.3 Particulars of the cash reserves consistent with Kirin’s desire to strengthen its existing operations The Scheme Consideration and related transaction costs may in Oceania and will provide a platform for growth in Kirin’s be partly funded through Kirin’s current cash reserves. operations in Australasia. As at 30 July 2009, Kirin has cash reserves in excess of 4.3 Acquiring entity JPY15.9 billion ($204 million) held with BTM-UFJ and in excess If the Scheme is approved by a Requisite Majority of Non-Kirin of JPY0.2 billion ($2.6 million) held with other financial institutions. Shareholders at the Scheme Meeting, Kirin intends to transfer These cash reserves are not subject to security interests, rights
limite d 2009 its existing 46.13% interest in Lion Nathan to the Australian of set off or other arrangements that might materially affect Kirin’s Holding Company. ability to use them to pay the Scheme Consideration.
If the Scheme is approved by a Requisite Majority of Non-Kirin 4.4.4 Particulars of the Facility nathan Shareholders and approved by the Court, on the Implementation To the extent that Kirin needs or decides to utilise external third Date, the Australian Holding Company will acquire all the Shares
lion party funds to pay part of the Scheme Consideration and related held by Non-Kirin Shareholders so that following implementation transaction costs, such funds will be drawn from the Facility. 18 of the Scheme, the Australian Holding Company will own 100% of the issued shares in Lion Nathan. From 7 August 2009, the available undrawn amount under the Facility is JPY258.9 billion ($3,300 million). The Facility permits 4.4 Funding arrangements for Scheme Kirin to draw down funds to finance the Scheme Consideration Consideration and related transaction costs. The Facility will mature on 2 June 4.4.1 Kirin’s internal borrowing arrangements 2010, or earlier if the funding commitment is cancelled in accordance with its terms. Kirin has agreed to provide the Australian Holding Company with all amounts the Australian Holding Company is required to pay (a) Conditions precedent and terms of the Facility for the acquisition of the Non-Kirin Shares pursuant to the Various conditions precedent apply to the drawdown by Kirin Scheme (as and when those payments are required to be made). under the Facility. These are generally procedural in nature 4.4.2 Overview of funding arrangements and customary for a facility of this kind. These conditions precedent include: Based on the number of Shares on issue as at the date of this Scheme Booklet, the maximum amount of cash payable by Kirin (i) BTM-UFJ, as agent for the Facility, having received a in connection with the Scheme will be approximately $3,309.5 drawdown notice no later than 12.00 pm on the day that million. This amount represents the Scheme Consideration of is 3 Business Days prior to the proposed drawdown $11.50 per Share multiplied by the number of Shares which Kirin (Drawdown Notice); does not currently own. As described in Section 6.12.2, the (ii) the representations and warranties given by Kirin under Board does not have any current intention to issue new Shares the Facility being true as at the date of the Drawdown to satisfy requirements under the Achievement Rights Plan. Notice; and The necessary funds to pay the Scheme Consideration and (iii) as at the date of the Drawdown Notice, Kirin not being related transaction costs will be met through Kirin’s cash in breach of, or at risk of breaching, any provision of reserves, supplemented, as required, by funds drawn down the Facility. under a facility with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTM-UFJ), which will be effective from 7 August 2009 (Facility). It is expected that these conditions will be satisfied before the The Facility is further described in Section 4.4.4. Second Court Date. As at the date of this Scheme Booklet, Kirin is not aware of any reason why any of the conditions precedent In aggregate, the funds available from Kirin’s existing cash to the drawdown under the Facility will not be satisfied in time to reserves and undrawn amount under the Facility are sufficient allow payment in full of the Scheme Consideration as and when to fund the Scheme Consideration and all associated it is due under the terms of the Scheme. transaction costs. LION NATHAN SCHEME BOOKLET 2009
(b) Representations and warranties in the Facility Kirin will conduct a general review of the operations, assets and employees of all of its Australasian operations (including The representations and warranties to be given by Kirin in Lion Nathan) with a view to achieving the objectives referred to relation to the Facility are customary for facilities of this kind. above. Final decisions on operations, assets and employment As at the date of this Scheme Booklet, Kirin is not aware of any will only be reached after that review and in light of all material breach of a representation or warranty nor any circumstance facts, information and circumstances at that time. The that would lead to a breach of a representation or warranty. statements in this Section 4.5 should be read in that context. (c) Undertakings and events of default in the Facility 4.5.4 Senior Management Team and Board The Facility contains events of default and undertakings usual Following the implementation of the Scheme, it is intended that for a facility of this nature. the existing Lion Nathan senior management team will become As at the date of this Scheme Booklet, Kirin is not aware of any the senior management team for Kirin’s Australasian operations, breach of an undertaking nor any circumstance that would lead with Robert Murray, the current Chief Executive Officer and to a breach of an undertaking. Kirin has no reason to believe that Managing Director of Lion Nathan, as the Chief Executive Officer any of the events of default will occur such that a drawdown will of the Australasian operations. It is intended that the managing not be able to be made or which would give rise to a right for director of the NF Group will be a member of the senior BTM-UFJ to terminate the Facility. management team and report to the Chief Executive Officer.
4.4.5 Statement of amounts Kirin intends that the senior management team will continue on a remuneration structure similar to that now prevailing, possibly The $ amounts in this Section 4 have been stated on the basis of with some incentives referable to the merged group or to a $A/JPY exchange rate of 78.44 and they are accurate as of expanded responsibilities in respect of other Kirin operations 30 July 2009. in Australia. Except as set out in Section 6.9, it is not expected 4.5 Kirin’s intentions if the Scheme is implemented that arrangements with the relevant executives will be agreed until after implementation of the Scheme. 4.5.1 Introduction It is proposed that Kirin’s Australasian operations will be The intentions set out in this Section 4.5 have been formed on conducted out of Lion Nathan’s current head office in Sydney the basis of facts and information concerning Kirin and the and the NF Group’s current head office in Melbourne. Subject general business environment which is known to Kirin as at the to the outcome of the general review referred to above, it is time of preparing this Scheme Booklet. Final decisions on these expected that over time certain corporate functions will be matters will only be made by Kirin in light of all material facts and limite d 2009 centralised across the Australasian businesses. Kirin expects circumstances at the relevant time. Accordingly, the statements to achieve synergy benefits in these general areas over time. set out in this Section 4.5 are statements of current intention Kirin does not believe it has a reasonable basis to speculate as only, which may change as new information becomes available nathan to what the value of these synergies is likely to be. or as circumstances change, and the statements in this Section
4.5 should be read in that context. Following the implementation of the Scheme, it is intended that lion Lion Nathan will convert to a proprietary company. This Section 4.5 sets out the intentions of Kirin in relation to: 19 Kirin intends that the board of the Australian Holding Company (a) the continuation of the business of Lion Nathan; will comprise one executive director and two non-executive (b) any major changes to be made to the business of directors who are executives of Kirin, three non-executive Lion Nathan, including any redeployment of the fixed assets directors who are not executives of Kirin, and one executive of Lion Nathan; and director (Robert Murray). No final decision has been made as to who the Kirin nominee directors or independent directors will be. (c) the future employment of the present employees of However Kirin has made inquiries as to whether Geoff Rickets, Lion Nathan, Gavin Walker and Glenn Barnes would consider making in circumstances where the Scheme is implemented. themselves available to be appointed as directors of the Australian Holding Company following the implementation of the 4.5.2 Lion Nathan to be delisted Scheme. At this stage, Kirin has been advised by those directors If the Scheme is implemented, Lion Nathan will request ASX to that they do not regard it as appropriate to respond to Kirin’s remove Lion Nathan from its official list and will request NZX to inquiries until the Non-Kirin Shareholders have met and voted on cancel Lion Nathan’s listing on NZSX. the Scheme at the Scheme Meeting.
4.5.3 Kirin’s Australasian operations 4.5.5 Business continuity / major changes
The overall objective of Kirin is to combine all of its Australasian Kirin has no current intention to make major changes to, or operations (other than Kirin Australia) into a single unified dispose of any parts of, the Lion Nathan business, redeploy any business structure, under a unified board structure and senior of Lion Nathan’s fixed assets or transfer any of Kirin’s current management team. businesses or material assets to Lion Nathan. It is intended to keep the current Lion Nathan business structure within the The holding company for Lion Nathan and the NF Group will be context of Kirin’s Australasian operations as described in the Australian Holding Company. Following implementation of the Section 4.5.3 above. Scheme, the Australian Holding Company is expected to be renamed Lion Nathan National Foods Pty Ltd. Lion Nathan and Kirin’s existing Australian businesses share some common requirements in terms of raw material The acquisition of 100% of Lion Nathan is consistent with Kirin’s procurement and suppliers. Those businesses also share desire to strengthen its existing operations in Oceania and is common customers. Through the integration of these intended to provide a platform for growth in Kirin’s operations businesses Kirin expects to achieve synergy benefits in in Australasia. lion nathan SCHEME BOOKLET 2009
4. Information on Kirin continued
these general areas over time. Kirin does not believe it has a 4.6.3 Benefits to Directors reasonable basis to speculate as to what the value of these Other than any retirement benefits payable by Lion Nathan to synergies is likely to be. Directors as detailed in Section 6.8, Kirin will not be making any 4.5.6 Future employment payment or giving any benefit to any current member of the Board as compensation or consideration for, or otherwise in As a general matter, it is Kirin’s present intention to continue the connection with, their resignation from the Board, if the Scheme employment of Lion Nathan’s current employees. becomes Effective and the Board is accordingly reconstituted. The general review as outlined in Section 4.5.3 may lead to some redeployment of resources at Lion Nathan’s current head office in Sydney and/or the NF Group’s current head office in Melbourne, as well as some limited redundancies to take account of the consolidation of roles across Kirin’s Australasian operations. However, a final decision will not be made on those matters until completion of the general review referred to in Section 4.5.3 above.
Kirin believes that the acquisition of 100% of Lion Nathan should offer benefits for Lion Nathan employees generally in that the bringing together of Lion Nathan and Kirin’s current Australasian businesses has the potential to create exciting employment opportunities for existing management and staff across the enlarged group.
Kirin intends that the remuneration arrangements for employees following implementation of the Scheme will equate to their current arrangements except that the Employee Share Acquisition Plan, the Share Scheme Section, the Employee Share Benefit Section and the Achievement Rights Plan will no longer operate but may be replaced with other appropriate incentive structures. The remuneration arrangements of employees, the terms of the limite d 2009 possible replacement incentive arrangements, and the employees who will be eligible to participate in those arrangements will be determined by the board of the Australian Holding Company nathan after implementation of the Scheme. Except as set out in Section 6.9, as at the date of this Scheme Booklet no offers lion have been made to any of the employees of Lion Nathan in 20 respect of these matters. 4.6 Kirin’s interests in Shares
As at the date of this Scheme Booklet, Kirin has voting power in approximately 46.13% of the Shares.
4.6.1 No dealings in Shares in previous four months
Except for the consideration to be provided under the Scheme, during the period of four months before the date of this Scheme Booklet, neither Kirin nor any of its Associates have provided or agreed to provide consideration for any Shares under a purchase or an agreement.
4.6.2 Benefits to holders of Shares
During the four months before the date of this Scheme Booklet, neither Kirin nor any of its Associates have given or offered to give or agreed to give a benefit to another person where the benefit was likely to induce the other person, or an Associate, to:
•• vote in favour of the Scheme; or
•• dispose of Shares,
and where the benefit was not offered to all Shareholders. LION NATHAN SCHEME BOOKLET 2009
5. Taxation implications for Shareholders
5.1 Introduction 5.2.2 Australian Tax Implications: Residents and PE Residents
This Section provides a general outline of the Australian and (a) Receipt of Special Dividend New Zealand income tax, capital gains tax, GST and stamp duty If you are a Resident or PE Resident, you must include the consequences for Non-Kirin Shareholders who: amount of the Special Dividend in your assessable income in •• receive the Special Dividend; and/or the income year it is received. As the Special Dividend will be fully franked, you will also be required to include in your •• dispose of their Shares to the Australian Holding Company assessable income an amount equal to the franking credits in accordance with the Scheme attached to the Special Dividend if you are a “qualified person” (collectively the Transaction). (see below).
This Section reflects the tax law in effect in Australia and The franking credits attached to the Special Dividend may be New Zealand as at the date of the Scheme Booklet. It does not used to offset the amount of tax that you are required to pay. take into account or anticipate any changes in the tax law, nor In order to obtain this tax offset, you must be a “qualified does it take into account the tax law of countries other than person”, which means you must hold your Shares “at-risk” Australia and New Zealand. for a certain period of time. You should satisfy this test if you continuously hold your Shares “at-risk” for at least 45 days This Section does not cover all possible Australian and during a prescribed period. New Zealand tax considerations that could apply to Non-Kirin Shareholders with respect to the Transaction. In particular, the The Class Ruling will outline in further detail the Commissioner’s following discussion is relevant only to Non-Kirin Shareholders views as to when a Shareholder will satisfy the relevant “holding who hold their Shares on capital account and not as revenue period” tests with respect to the Special Dividend. assets or as trading stock (unless otherwise specified below). If you are an individual or complying superannuation fund and Nor does it deal with Non-Kirin Shareholders who are Residents your tax liability for the income year is less than the amount of (as defined below) and acquired their Shares before 20 the franking credits attached to the Special Dividend, you may September 1985. be entitled to a refund for the excess franking credits. This does This Section does not deal with Non-Kirin Shareholders who not extend to companies. may be subject to special tax rules, such as banks, insurance (b) Disposal of Shares companies, tax exempt organisations, dealers in securities or Non-Kirin Shareholders who acquired their Shares in connection If you are a Resident or PE Resident, a capital gains tax (CGT) with an employee share plan. event will occur when you dispose of your Shares in accordance limite d 2009 with the Scheme. You will realise a capital gain in connection For the purpose of the discussion below: with this CGT event if the amount you receive in connection with
•• a Resident means a resident of Australia for Australian this disposal (called the “capital proceeds”) is more than your nathan income tax purposes; cost base in the Shares. You will realise a capital loss to the
extent that the capital proceeds received in connection with this lion •• a Non-Resident means a Shareholder who is not a Resident disposal is less than your reduced cost base in the Shares. and who does not hold their Shares through a permanent 21 Capital losses can generally be offset only against capital gains establishment in Australia; you realise in the same income year or in later income years. •• a PE Resident means a Shareholder who is not a Resident Capital proceeds and who holds their Shares through a permanent establishment in Australia; and The Class Ruling will provide details as to the calculation of capital proceeds received in connection with the disposal of •• a New Zealand Resident means a resident of New Zealand your Shares. for New Zealand income tax purposes. Cost base/reduced cost base The following discussion does not constitute tax advice. Each Non-Kirin Shareholder should obtain their own tax advice You should obtain tax advice to confirm the cost base or regarding the tax consequences that may arise in connection reduced cost base of your Shares. The cost base of your with the Transaction. Shares will generally be the sum of the amount you paid for your Shares, your acquisition costs and other costs relating 5.2 Australian Tax Implications to the holding and disposal of your Shares, but only to the extent 5.2.1 Class Ruling you have not claimed a deduction for such costs. The reduced cost base is usually determined in a similar, but not identical Lion Nathan has lodged a Class Ruling application with the ATO manner. There are a number of circumstances which may result requesting the Commissioner’s views on the Australian income in your cost base or reduced cost base being calculated in a tax implications for certain Non-Kirin Shareholders who different manner to that outlined above. participate in the Transaction. The Class Ruling has not been finalised as at the date of the Scheme Booklet. Lion Nathan If you acquired your Shares at or before 11.45am on 21 September anticipates that the Class Ruling will be published by the ATO 1999, you may choose to index the cost base of your Shares. in August 2009 and should be consistent with Section 5 of this The effect of indexation is to increase your cost base by Scheme Booklet. When published, the Class Ruling will be reference to movements in the consumer price index. You available on the ATO website at www.ato.gov.au. may only elect to index your cost base up to the period ended lion nathan SCHEME BOOKLET 2009
5. Taxation implications for Shareholders continued
30 September 1999. If you make this election, you will not qualify New Zealand tax payable will be reduced by the amount of the for the discount CGT concession which is discussed below. imputation credits attached to the Special Dividend.
Discount CGT concession Under current law, if you are a corporate Shareholder and a New Zealand Resident (NZ Corporate Shareholder) the Special You may qualify for discount CGT treatment on the disposal of Dividend will be exempt from New Zealand tax. However, you your Shares if you acquired your Shares more than 12 months will be required to make a foreign dividend payment to the prior to disposal and you are an individual, trust or complying New Zealand Inland Revenue in the amount of 30% of the gross superannuation fund. Individuals and trusts are entitled to dividend (being the amount of the Special Dividend and the reduce any capital gain remaining after the application of any attached imputation credits) less imputation credits attached capital losses by 50% and complying superannuation funds are to the Special Dividend. The imputation credits attached entitled to reduce any capital gain remaining after the application 1 to the Special Dividend will be credited to your imputation of any capital losses by 33 /3%. Companies are not eligible for credit account. discount CGT treatment. If the proposed Taxation (International Taxation, Life Insurance, As noted above, you are not entitled to discount CGT treatment and Remedial Matters) Bill 2008 is enacted in its current form if you elect to index your cost base. and Ministerial recommendations are accepted, and you are a PE Shareholder NZ Corporate Shareholder that has a 2009-2010 income year which begins after 30 June 2009, you should be taxed on the If you are a PE Shareholder, you may be entitled to disregard receipt of the Special Dividend in the same manner as an NZ that portion of your capital gain that relates to a period when Non-corporate Shareholder. you did not hold your Shares through a permanent establishment in Australia. We recommend that you contact your tax adviser to 5.3.2 Disposal of Shares obtain further advice in this regard. There is no general capital gains tax in New Zealand. If you 5.2.3 Australian Income Tax implications: Non-Residents are a New Zealand Resident and hold your Shares as capital assets, you will not be taxed in New Zealand on the disposal (a) Receipt of Special Dividend of your Shares. If you are a Non-Resident, no Australian withholding tax will be However, in certain situations the Shares will be treated as deducted from the Special Dividend when paid to you, as it will being held on revenue account for New Zealand tax purposes be fully franked. You will not be liable for any Australian income and in such circumstances the proceeds will be subject to limite d 2009 tax in respect of the receipt of the Special Dividend. New Zealand income tax. Such situations would include if the (b) Disposal of Shares New Zealand Resident acquired the Shares for the purpose of disposal, if the Shares formed part of a share dealing business
nathan If you are a Non-Resident, you will not have to pay Australian of the New Zealand Resident, or if gains were derived from the income tax on any capital gain that arises when you dispose of carrying on or carrying out of an undertaking or scheme entered
lion your Shares in accordance with the Scheme, unless both of the into or devised for the purpose of making a profit. following requirements are satisfied: 22 If you are a New Zealand resident and hold the Shares on •• you hold a “non-portfolio interest” in Lion Nathan; and revenue account, the amount derived from the disposal of the •• Lion Nathan passes the “principal asset test”. Shares will be assessable income in New Zealand. However, you will be able to deduct expenditure incurred as the cost of Broadly, you will hold a “non-portfolio interest” in Lion Nathan if the Shares. Such expenditure will usually include the amount you (together with your associates) own, or owned, throughout paid for the Shares, acquisition costs and other costs relating a 12 month period during the 2 years preceding the sale of your to the holding and disposal of the Shares, but only to the extent Shares, 10% or more of all the shares in Lion Nathan. deductions have not been previously claimed for such costs. If you do not hold such an interest in Lion Nathan, you should not 5.4 Stamp duty and GST be subject to CGT on disposal of your Shares. If you do hold such an interest, you should consult your tax adviser in relation No Australian or New Zealand stamp duty or GST will be payable to the second requirement. by a Non-Kirin Shareholder on the disposal of their Shares in accordance with the Scheme. 5.3 New Zealand Tax Implications
5.3.1 Receipt of Special Dividend
New Zealand imputation credits will be attached to the Special Dividend. If the Special Dividend is paid within three months of being determined, as is intended, NZD0.29 imputation credits will be attached to the $0.50 Special Dividend (which itself will be converted to NZD in accordance with Section 2.7). If the Special Dividend is not paid within three months of being determined, the exact amount of New Zealand imputation credits that can be attached to the Special Dividend will depend on the exchange rate between Australia and New Zealand when the Special Dividend is paid.
If you are a non-corporate Shareholder and you are a New Zealand Resident (NZ Non-corporate Shareholder) you must include the gross dividend (being the amount of the Special Dividend and the attached imputation credits) in your assessable income for New Zealand tax purposes. However, the amount of LION NATHAN SCHEME BOOKLET 2009
6. Additional Information
This Section sets out the additional information required by 6.3 Dealings in Shares section 412(1) of the Corporations Act and Part 3 of Schedule 8 To enable the Scheme to be implemented, Lion Nathan will apply of the Corporations Regulations, as well as some additional to ASX and NZX for suspension from trading as from the close information that may be of interest to Shareholders. of trading on the Effective Date. Shares will not be able to be 6.1 Management of potential conflict issues traded beyond the close of trading on the Effective Date.
On 23 April 2009, Lion Nathan announced the receipt of Kirin’s For the purposes of implementation of the Scheme, Lion Nathan proposal to acquire all of the outstanding Shares in Lion Nathan will, between the Effective Date and the Scheme Record Date, not owned by Kirin. determine who are the Non-Kirin Shareholders as at the Scheme Record Date, being those entitled to the Scheme Consideration. The Board recognised the potential for conflict to arise in relation to the position of the Kirin Nominee Directors as Any dealing in Shares received by Computershare before nominee directors of Kirin. To manage such conflicts, the 5.00pm on the Scheme Record Date will be recognised, but Board established: no dealing in Shares (whenever effected) will be recognised if received by Computershare after 5.00pm on the Scheme (a) an Independent Board Committee (IBC) comprising the Record Date. Independent Directors to consider the proposal - the IBC did not include the Kirin Nominee Directors; and 6.4 Removal of Lion Nathan from the official list
(b) protocols and procedures to manage potential conflicts Following the implementation of the Scheme. Lion Nathan will arising during normal Board meetings. apply to ASX for removal of Lion Nathan’s securities from the official list of ASX and to NZX for cancellation of Lion Nathan’s The Kirin Nominee Directors have chosen not to make a listing on NZSX. recommendation to Non-Kirin Shareholders in respect of the Scheme, due to the potential conflict which arises as a result 6.5 No relevant restrictions in the Constitution of of their position as nominee directors of Kirin and their Lion Nathan relationship with Kirin. There are no restrictions on the right to transfer Shares in 6.2 Interim Dividend and Special Dividend Lion Nathan’s Constitution. Section 260A of the Corporations Act enables a company to 6.6 Marketable Securities of Lion Nathan held by financially assist a person to acquire shares in the company or on behalf of Directors or a holding company only if certain conditions are satisfied. Financial assistance of this kind would be permitted if the limite d 2009 giving of assistance does not materially prejudice: LION NATHAN LION NATHAN DIRECTOR ACHIEVEMENT (a) the interests of the company; SHARES nathan RIGHTS (b) the interests of its shareholders; or lion Geoff Ricketts 25,000 0 (c) the company’s ability to pay its creditors. 23
The Corporations Act specifically contemplates that financial Glenn Barnes 10,000 0 assistance (of the kind that is regulated under Section 260A) may take the form of paying a dividend and may be given before Peter Bush 0 0 the acquisition of shares.
The Interim Dividend was paid to Shareholders on 23 June 2009. Hirotake Kobayashi 0 0 Further, the Board has determined, subject to the Scheme being approved by a Requisite Majority of Non-Kirin Shareholders at Fumio Miki 0 0 the Scheme Meeting, that Lion Nathan will pay a Special Dividend of $0.50 in relation to each Share held on the Special Dividend Senji Miyake 0 0 Record Date. Kirin (or the Australian Holding Company) will be a Shareholder as at the Special Dividend Record Date, so will be Robert Murray 363,556 168,478 entitled to receive the Special Dividend. Provided that the Scheme is approved by a Requisite Majority of Non-Kirin Andrew Reeves 34,994 164,717 Shareholders at the Scheme Meeting, the Special Dividend is expected to be paid on 6 October 2009. Gavin Walker 0 0
Lion Nathan does not consider that the payment of the Interim Barbara Ward 0 0 Dividend and the Special Dividend will materially prejudice the interests of Lion Nathan or its Shareholders, or materially prejudice Lion Nathan’s ability to pay its creditors. This It is currently anticipated that Robert Murray and Andrew conclusion has been reached after taking into account the Reeves will be granted Achievement Rights in relation to the financial position of Lion Nathan, including the funding facilities Achievement Period ending 30 September 2009 as described in available to Lion Nathan and its estimated forecast cash flows. Section 6.12.2. Lion Nathan intends to fund the Special Dividend out of existing cash and committed funding facilities. Lion Nathan forecasts debt facility headroom (committed, undrawn debt facilities) in excess of $500m as at 30 September 2009 which is sufficient to pay the Special Dividend of $267m. lion nathan SCHEME BOOKLET 2009
6. Additional Information continued
6.7 Marketable Securities of Kirin held by or on provide incentive benefits comparable to Mr Murray’s existing behalf of Directors arrangements, including under the Achievement Rights Plan. As Mr Murray’s Achievement Rights Plan currently runs through to 30 September 2010, this component will include DIRECTOR SHARES OPTIONS an incentive benefit in respect of the financial year ended 30 September 2010 contingent on Mr Murray meeting his Geoff Ricketts 0 0 performance targets for that year. Further details are set out in Sections 4.5.6 and 6.12.2. Glenn Barnes 0 0 Under the revised remuneration arrangements Mr Murray’s fixed and short-term on target incentive-based remuneration will Peter Bush 0 0 increase by 18.75%, while long-term on target incentive based remuneration will decrease by 38.7%. Hirotake Kobayashi 5,800 0 Mr Murray’s revised remuneration arrangements will include Fumio Miki 2,870 0 additional events where redundancy benefits will be payable.
Following implementation of the Scheme, Andrew Reeves Senji Miyake 49,000 0 will continue as a senior executive within the merged group. Subject to confirmation of Andrew’s role within the merged Robert Murray 0 0 group, it is expected that Andrew’s total remuneration will remain unchanged, as will the relative proportions of the fixed and Andrew Reeves 0 0 incentive-based components. As with Mr Murray, the arrangements for Mr Reeves’ on target incentive-based Gavin Walker 0 0 remuneration have yet to be concluded, but are expected to provide incentive benefits comparable to Mr Reeves’ existing Barbara Ward 0 0 arrangements under the Achievement Rights Plan.
Except as detailed elsewhere in this Scheme Booklet, there are 6.8 Payments or other benefits to Directors, no other agreements or arrangements made between a Director secretaries or executive officers of Lion Nathan and another person in connection with or conditional on the
limite d 2009 Following the implementation of the Scheme, the existing outcome of the Scheme. non-executive Directors will retire from the Board, and the 6.10 Directors’ interests in contracts entered into Board will thereafter comprise management nominees. On their by Kirin nathan retirement from the Board, independent non-executive Directors who joined the Board prior to 1 October 2003 will be eligible to No Director has any interest in any contract entered into by Kirin lion receive from Lion Nathan retirement benefits (excluding or any of its Related Bodies Corporate, other than the interests superannuation payments, if relevant) pursuant to arrangements set out elsewhere in this Scheme Booklet. 24 agreed in 2004. The retirement benefits are capped at three 6.11 Interests of Directors in the Scheme times the relevant director’s fees for 2004, being a total payment of $750,000 for Geoff Ricketts, and $300,000 for each of Glenn No Director has any interest in the Scheme, other than the Barnes, Gavin Walker and Barbara Ward. interests set out elsewhere in this Scheme Booklet.
Lion Nathan pays premiums in respect of a directors and 6.12 Lion Nathan employee incentive plans officers (D&O) insurance policy for the benefit of its Directors’ 6.12.1 Australian Employee Share Acquisition Plan and executive officers. (a) Overview Except as set out above, there is no payment or other benefit that is proposed to be made or given to any director, secretary The Employee Share Acquisition Plan is a general employee or executive officer of Lion Nathan or of any Related Body share plan pursuant to which Shares may be offered to relevant Corporate as compensation for loss of, or as consideration for Australian resident employees of Lion Nathan. The ESAP allows or in connection with their retirement from, office as a director, eligible employees who have not participated in the previous secretary or executive officer of Lion Nathan or of a Related offers made under the ESAP to receive $1,000 worth of Shares Body Corporate, as the case may be, as a result of the Scheme. for no cash consideration. Employees who have participated in prior offers made under the ESAP are provided the opportunity 6.9 Agreements or arrangements with Directors to obtain $1,000 worth of Shares through salary sacrifice.
Following implementation of the Scheme, Robert Murray will Shares granted under the ESAP are held on trust for three years become the Chief Executive Officer of Kirin’s Australasian from the date of grant and cannot be dealt with until the earlier operations. Mr Murray has agreed revised remuneration of three years passing from the date the Shares are allocated arrangements which will take effect immediately after the or until termination of employment, or otherwise in accordance Implementation Date. Mr Murray’s total remuneration will remain with the ESAP Trust Deed. unchanged, but the components will be structured as follows: (b) Dealing with the ESAP in relation to the Scheme •• fixed remuneration of $1,900,000; and Each participant in the ESAP who is entitled to Shares held •• on target incentive-based remuneration of $1,900,000 by the trustee of the ESAP: (comprising short term incentive-based remuneration of $1,140,000 and long-term incentive-based remuneration •• may give the trustee of the ESAP a written notice for the of $760,000). The arrangements for the incentive-based trustee to exercise the voting rights attached to Shares at component have yet to be concluded, but are expected to the Scheme Meeting in accordance with the notice; and LION NATHAN SCHEME BOOKLET 2009
•• is entitled to receive the Special Dividend payable on the Period in his current plan for the year ended 30 September 2008 Shares held by that participant (if the Scheme is approved and was granted 168,478 Achievement Rights. Mr Murray by a Requisite Majority of Non-Kirin Shareholders), currently holds 168,478 Achievement Rights. Mr Murray is eligible to participate in the ARP for the years ending 30 September in accordance with the ESAP Trust Deed. 2009 and 30 September 2010. In the event that the trustee of the ESAP does not receive a Andrew Reeves’ participation was approved by Shareholders written notice from a participant in respect of the exercise of at the 2007 Annual General Meeting for 3 financial years from voting rights attached to that participant’s Shares, the trustee 1 October 2006. Mr Reeves completed his second Achievement may exercise the voting rights attaching to that participant’s Period in his current plan for the year ended 30 September 2008 Shares as it thinks fit. As at the date of this Scheme Booklet, and was granted 76,766 Achievement Rights. Mr Reeves currently Lion Nathan understands that the trustee of the ESAP will vote holds 164,717 Achievement Rights. Mr Reeves is eligible to in favour of the Scheme at the Scheme Meeting. participate in the ARP for the year ending 30 September 2009. The trustee of the ESAP will distribute the Special Dividend to (c) Dealing with Achievement Rights in relation to the Scheme participants entitled to Shares held in the ESAP trust on the Special Dividend Record Date in accordance with the ESAP The Board intends, subject to the Scheme being approved by Trust Deed. a Requisite Majority of Non-Kirin Shareholders at the Scheme Meeting and prior to the Special Dividend Record Date, to If the Scheme is approved by the Court on the Second Court exercise its discretion under the ARP Rules to accelerate the Date and the Scheme becomes Effective, Shares held by the grant and vesting of Achievement Rights and, in Australia, trustee of the ESAP will be transferred to the Australian Holding to allocate Shares in relation to those Achievement Rights Company on the Implementation Date in accordance with in relation to the Achievement Period ending 30 September the Scheme. 2009, subject to an assessment of performance for the It is proposed that the trustee of the ESAP will direct Lion Nathan Achievement Period ending 30 September 2009 against the to pay the Scheme Consideration in accordance with the applicable Achievement Targets for the relevant participants Scheme to Participants who are beneficially entitled to Shares at that time. The Board also intends to exercise its discretion in the ESAP on the Scheme Record Date. under the ARP Rules to accelerate the vesting of all outstanding Achievement Rights into Qualifying Achievement Rights and, in 6.12.2 Achievement Rights Plan Australia, to allocate Shares in relation to those Achievement (a) Overview Rights conditional on the approval of the Scheme on the Second
Court Date. limite d 2009 The Achievement Rights Plan is a leadership incentive plan which is designed to encourage superior achievement and long-term New Zealand participants’ Achievement Rights for the commitment to the Lion Nathan Group by the executives and Achievement Period ending 30 September 2009 will be granted other leaders of the Lion Nathan Group who are invited to as described above, all outstanding Achievement Rights held by nathan participate in the ARP. the participants prior to the Special Dividend Record Date will lion convert into Qualifying Achievement Rights, and participants will The ARP operates by giving participants in the ARP the receive a cash payment equal to the Special Dividend plus the 25 opportunity to acquire Achievement Rights if their Achievement Scheme Consideration for each such Qualifying Achievement Target is met in respect of the relevant Achievement Period. Right, subject to approval of the Scheme on the Second An Achievement Right is a right to acquire one Share (whether Court Date. by way of issue or transfer, at Lion Nathan’s election (although see below in respect of the New Zealand ARP)), subject to the The Board does not have any current intention to issue new participant being employed with the Lion Nathan Group at the Shares in order to satisfy its obligations in relation to the time the Achievement Right becomes a Qualifying Achievement exercise of Achievement Rights. The Lion Nathan Employee Right. Lion Nathan’s preferred practice is to purchase Shares Incentive Plan Trust currently holds sufficient Shares to satisfy on-market, which is non-dilutive. When an Achievement Right its obligations to relevant participants upon the exercise of held by a participant becomes a Qualifying Achievement Right, Achievement Rights. the participant may exercise the Qualifying Achievement Right If the Scheme is approved by a Requisite Majority of Non-Kirin during the applicable exercise period. Shareholders at the Scheme Meeting, relevant participants will In New Zealand the ARP is operated through the LNEBP and upon receive the benefit of the Special Dividend. exercise of Qualifying Achievement Rights, the trustee of the LNEBP If the Scheme is approved by Court, relevant participants will transfer the relevant number of Shares to the participant. will receive the benefit of the Scheme Consideration. Alternatively the participant may elect to receive a cash benefit instead of Shares. In relation to participants whose plans under the ARP run beyond the Achievement Period ending 30 September 2009, Each participant’s plan under the ARP runs for three consecutive it is intended that these participants will be eligible to participate Achievement Periods. in replacement incentive arrangements to be determined As at 30 July 2009, there were 1,371,009 Achievement Rights on by the board of the Australian Holding Company after the issue under the Australian ARP and 110,640 Achievement Rights implementation of the Scheme. Please refer to section 4.5.6. on issue under the New Zealand ARP. To the extent that the Scheme becomes Effective and not all (b) Directors’ participation of the Achievement Rights have been exercised, cancelled or otherwise acquired as at the Effective Date, Kirin intends to Two Lion Nathan directors currently participate in the ARP. invoke its general power of compulsory acquisition under Part Robert Murray’s participation was approved by Shareholders 6A.2 of the Corporations Act after the Implementation Date to at the 2008 Annual General Meeting for 3 financial years from compulsorily acquire those Achievement Rights and any Shares 1 October 2007. Mr Murray completed his first Achievement which are allocated on exercise of those Achievement Rights. lion nathan SCHEME BOOKLET 2009
6. Additional Information continued
6.12.3 Share Scheme Section (New Zealand) •• Lonergan Edwards & Associates Limited as Independent Expert engaged by the Independent Directors; Permanent New Zealand employees of Lion Nathan Group may be eligible to join the LNEBP. •• Computershare Investor Services Pty Limited;
The Share Scheme Section is a section of the LNEBP where •• Kirin; and benefits are calculated by reference to the Lion Nathan •• the Australian Holding Company. share price. Lonergan Edwards & Associates Limited has also given and If the Scheme is approved by a Requisite Majority of Non-Kirin has not, before the time of registration of this Scheme Booklet Shareholders at the Scheme Meeting and by the Court, the by ASIC, withdrawn its written consent to the inclusion of its Share Scheme Section will be wound up. Members of the Share Independent Expert’s Report in this Scheme Booklet in the form Scheme Section will be given the option to transfer their benefit and context in which it is included and to all references in this under the Share Scheme Section to any other open section of Scheme Booklet to that Report in the form and context in which the LNEBP, or to receive their benefit in cash. they appear. 6.12.4 Employee Share Benefit Section (New Zealand) Kirin has also given and has not, before the time of registration The Employee Share Benefit Section is a section of the of this Scheme Booklet by ASIC, withdrawn its written consent LNEBP pursuant to which Lion Nathan may offer New Zealand to inclusion of the Kirin Information in the form and context in employees the opportunity to receive Shares. Participants are which it is included. allocated a number of shares (of approximately A$1000 value) 6.15 Disclaimers for no cash consideration. When the member becomes eligible to receive a benefit under the terms of the Employee Share Each person referred to in Section 6.14: Benefit Section, the member may elect to receive from the (a) does not make, or purport to make, any statement in this trustee his or her benefit entitlement in the form of Shares, or a Scheme Booklet other than those statements made in the cash sum equal to the market value (as defined in the trust deed capacity and to the extent the person has provided its governing the LNEBP) of the Shares. consent, as referred to above; and If the Scheme is approved by a Requisite Majority of Non-Kirin (b) to the maximum extent permitted by law, expressly disclaims Shareholders at the Scheme Meeting, the Employee Share and takes no responsibility for any part of this Scheme Benefit Section will be wound up. Participants of the Employee Booklet other than as described in this section with that limite d 2009 Share Benefit Section will be given the option of receiving their person’s consent. benefit in shares or a cash lump sum. The benefits will be paid or transferred to participants of the Employee Share Benefit 6.16 Other information material to the making of a
nathan Section prior to the Special Dividend Record Date. decision in relation to the Scheme
6.13 Material changes in the financial position of Except as set out in this Scheme Booklet, there is no information lion Lion Nathan material to the making of a decision in relation to the Scheme, being information that is within the knowledge of any Director 26 To the knowledge of the Directors the financial position of or any director of a Related Body Corporate of Lion Nathan, that Lion Nathan has not materially changed since 31 March 2009 has not previously been disclosed to Shareholders. other than as disclosed to ASX, other than: Copies of Lion Nathan’s full statutory interim results may be (a) the declaration on 20 May 2009 of the Interim Dividend, obtained from the ASX website (www.asx.com.au) or from incurring an aggregate debt of approximately $117.5 million Lion Nathan’s website (www.lion-nathan.com). Lion Nathan will (paid on 23 June 2009); provide a copy of its full statutory interim results for the 6 (b) the determination on 15 July 2009 of the Special Dividend - if months ended 31 March 2009 free of charge to anyone who the Scheme is approved by a Requisite Majority of Non-Kirin requests a copy before the Scheme is approved by the Court. Shareholders at the Scheme Meeting, this determination will 6.17 ASIC relief and ASX waiver result in an aggregate debt of approximately $267 million; and 6.17.1 ASIC relief (c) as set out in this Scheme Booklet. Clause 8302(h) of Part 3 of Schedule 8 to the Corporations Further information on Lion Nathan’s ASX announcements is Regulations requires that an explanatory statement include a contained in Section 3.4 and Annexure E. statement whether, within the knowledge of the directors of 6.14 Consents the company the subject of the scheme of arrangement, the financial position of the company has materially changed since The following parties have given and have not, before the time the date of the last balance sheet laid before shareholders in of registration of this Scheme Booklet by ASIC, withdrawn their general meeting or sent to shareholders in accordance with written consent to be named in this Scheme Booklet in the form section 314 or 317 of the Corporations Act and, if so, full and context in which they are named: particulars of any change. •• Mallesons Stephen Jaques as legal adviser to Lion Nathan;
•• Caliburn Partnership Pty Limited as financial adviser to Lion Nathan; LION NATHAN SCHEME BOOKLET 2009
ASIC has granted Lion Nathan relief from the requirements of clause 8302(h) of Part 3 of Schedule 8 of the Corporations Regulations on the basis that:
(a) Lion Nathan has complied with Division 1 of Part 2M.3 of the Corporations Act in respect of the half year ended 31 March 2009;
(b) this Scheme Booklet states that Lion Nathan will give a copy of the documents referred to in section 302 of the Corporations Act for the 6 months ended 31 March 2009 free of charge to anyone who asks for them before the Scheme is approved by order of the Court;
(c) any material change in Lion Nathan’s financial position occurring after 31 March 2009 but prior to the date of this Scheme Booklet is disclosed in this Scheme Booklet; and
(d) this Scheme Booklet is substantially in the form given to ASIC on 4 August 2009.
6.17.2 ASX waiver
ASX has granted a waiver from Listing Rule 6.23.3 to the extent necessary to permit Lion Nathan to amend the terms of Achievement Rights granted under the Achievement Rights Plan to permit the accelerated vesting of Achievement Rights as described in Section 6.12.2, without the approval of Shareholders, on the condition that the Scheme is approved by a Requisite Majority of Non-Kirin Shareholders at the Scheme Meeting and the Court. 6.18 Supplementary information
If, between the date of lodgement of this Scheme Booklet for limite d 2009 registration by ASIC and the Effective Date, Lion Nathan or Kirin becomes aware that: nathan (a) a material statement in this Scheme Booklet is false or
misleading; lion
(b) there is a material omission from this Scheme Booklet; 27
(c) a significant change affecting a matter included in this Scheme Booklet has occurred; or
(d) a significant new matter has arisen which would have been required to be included in this Scheme Booklet if it had arisen before the date of lodgement of this Scheme Booklet for registration by ASIC, then Lion Nathan will prepare a supplementary document to this Scheme Booklet.
The form which the supplementary document may take will depend on the nature and timing of the new or changed circumstances. 6.19 Further information
Further information on Lion Nathan and Kirin can be found on each company’s web-site:
•• Lion Nathan: www.lion-nathan.com
•• Kirin: www.kirinholdings.co.jp/english/index.html lion nathan SCHEME BOOKLET 2009
7. Glossary and Interpretation
7.1 Glossary Computershare means Computershare Investor Services Pty Limited (ACN 078 279 277). The following is a glossary of certain terms used in this Scheme Booklet. Constitution means the constitution of Lion Nathan Limited, as amended from time to time. Achievement Period means, in relation to the possible grant of Achievement Rights to a participant in the Achievement Rights Corporations Act means the Corporations Act 2001 (Cwlth). Plan, the relevant financial year of Lion Nathan in respect of which Corporations Regulations means the Corporations Regulations the Board will assess the performance of the relevant participant 2001 (Cwlth). and/or the Lion Nathan Group (as applicable) against the applicable Achievement Targets for the possible grant of Achievement Rights Court means the Federal Court of Australia (New South Wales to the relevant participant in relation to that period. registry), or such other court of competent jurisdiction under the Corporations Act agreed in writing by Lion Nathan and Kirin. Achievement Right means: Dairy Farmers means Australian Co-operative Foods Limited. (a) a right to acquire a Share (by transfer or issue at the election of Lion Nathan) granted under the ARP (Australia); or Deed Poll means the document executed by Kirin set out in Annexure C. (b) a right to acquire a Share (from the trustee of the LNEBP) granted under the ARP (New Zealand), Directors means directors of Lion Nathan as at the date of this Scheme Booklet. as the context requires. EBIT means earnings before interest and tax. Achievement Rights Plan or ARP means the Achievement Rights Plan established by Lion Nathan and operated in Australia under EBITA means earning before interest, tax and amortisation. the ARP Rules, and the Achievement Rights Plan established by EBITDA means earnings before interest, tax, depreciation and Lion Nathan and operated in New Zealand under the ARP(NZ) Rules amortisation. and the trust deed governing the LNEBP, as the context requires. Effective means, when used in relation to a Scheme, the coming Achievement Target means, in relation to the possible grant of into effect, pursuant to section 411(10) of the Corporations Act, Achievement Rights to a participant of the Achievement Rights of the order of the Court made under sections 411(4)(b) and Plan, performance hurdles determined by the Board from time 411(6) in relation to the Scheme. to time for the possible grant of Achievement Rights to the
limite d 2009 relevant participant in relation to specific Achievement Periods. Effective Date means the date upon which the Scheme becomes Effective expected to be 7 October 2009. ACCC means the Australian Competition and Consumer Commission. Employee Share Acquisition Plan or ESAP means the nathan Lion Nathan Employee Share Acquisition Plan established by AIFRS means Australian Equivalents to International Financial Lion Nathan in accordance with the ESAP Trust Deed. lion Reporting Standards. Employee Share Benefit Section means the Employee Share 28 ARP Rules means the rules of the Achievement Rights Plan Benefit Section of the LNEBP, as amended from time to time. (Australia) dated 1 December 2008, as amended from time to time. ESAP Trust Deed means the Employee Share Acquisition Plan ARP(NZ) Rules means the rules of the Achievement Rights Plan Trust Deed dated 1 May 2003, as amended. (New Zealand) dated 1 November 2005, as amended from time to time. Excluded Shareholder means any Shareholder who is Kirin or a Related Body Corporate of Kirin. ASIC means the Australian Securities and Investments Commission. FIRB means the Foreign Investment Review Board.
Associate has the meaning given to that term in section 12(2) of FY means the financial year ended or ending 30 September (as the Corporations Act. For the avoidance of doubt, an Associate the context requires). does not include an officer of Kirin, or an officer of a Related GST means goods and services tax. Body Corporate of Kirin. Implementation Agreement means the Implementation ASX means ASX Limited (ABN 98 008 624 691), Australian Agreement between Lion Nathan and Kirin dated 10 May 2009, Securities Exchange or the Australian Stock Exchange as a copy of which is included in Annexure A. appropriate. Implementation Date means the fifth Business Day following ATO means the Australian Taxation Office. the Scheme Record Date, expected to be 21 October 2009. Australian Holding Company means Kirin Holdings (Australia) Independent Board Committee or IBC means the independent Pty Ltd (ACN 128 004 268). board committee formed by the Lion Nathan Board comprising Board means the board of Directors of Lion Nathan. the Independent Directors.
Business Day means a day that is not a Saturday, Sunday or Independent Directors means the Directors, other than the public holiday in Sydney, Australia. Kirin Nominee Directors.
Cash Payments means the cash payments made in respect Independent Expert means Lonergan Edwards & Associates of the Special Dividend and the Scheme Consideration, Limited (ABN 53 095 445 560), who has been engaged by the representing an aggregate sum of $12.00 per Share. Independent Directors to opine on whether the Scheme is fair and reasonable and in the best interests of Non-Kirin Shareholders. CGT means capital gains tax. Independent Expert’s Report means the report prepared by Commissioner means the Commissioner of Taxation. the Independent Expert, set out in Annexure D. LION NATHAN SCHEME BOOKLET 2009
Interim Dividend means the dividend of $0.22 paid in respect Scheme Consideration means a cash payment of $11.50 for of each Share held on 5 June 2009, paid by Lion Nathan on each Share held by Non-Kirin Shareholders as at the Scheme 23 June 2009. Record Date.
JPY means Japanese Yen. Scheme Meeting means the meeting of Shareholders ordered by the Court under section 411(1) of the Corporations Act, to be Kirin means Kirin Holdings Company, Limited. convened for the purposes of considering the Scheme. Kirin Group has the meaning given to that term in Section 4.1. Scheme of Arrangement or Scheme means the proposed Kirin Information means the information in Section 4 of this scheme of arrangement between Lion Nathan and Non-Kirin Scheme Booklet prepared and provided by Kirin and its advisers. Shareholders, as set out in Annexure B, subject to any alterations or conditions made or required by the Court under Kirin Nominee Directors means Senji Miyake, Hirotake section 411(6) of the Corporations Act and approved in writing Kobayashi and Fumio Miki. by Lion Nathan and Kirin. Lion Nathan means Lion Nathan Limited (ABN 34 093 160 448). Scheme Record Date means 7.00pm on the fifth Business Lion Nathan Group means Lion Nathan and each of its Day following the Effective Date or such other date (after the Subsidiaries. Effective Date) as Lion Nathan and Kirin agree, expected to be 14 October 2009. Lion Nathan Information means the information contained in this Scheme Booklet, other than Section 4 and the Independent Second Court Date means the day on which the Court makes Expert’s Report, prepared and provided by Lion Nathan. an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme, expected to be 7 October 2009. LNEBP means the Lion Nathan Employee Benefit Plan (New Zealand), a company sponsored registered superannuation Share Register means the register of Shareholders in scheme governed by the trust deed dated 2 July 2007, as Lion Nathan maintained by Computershare, and Share Registry subsequently amended. has a corresponding meaning.
Listing Rules means the Listing Rules of ASX. Shareholder means a person who is registered in the Share Register from time to time as the holder of a Share. Marketable Securities has the same meaning as in the Corporations Act. Share means an issued fully paid ordinary share in the capital of Lion Nathan. NF Group has the meaning given to that term in Section 4.1. limite d 2009 Share Scheme Section means the Share Scheme Section of Non-Kirin Share means a Share held by a Non-Kirin Shareholder the LNEBP, as amended from time to time. as at the Scheme Record Date and for the avoidance of doubt
includes any Shares issued on or before the Scheme Record Special Dividend means the dividend of $0.50 in relation to each nathan Date including upon the exercise of any Lion Nathan Share held on the Special Dividend Record Date, payable by
Achievement Rights. Lion Nathan if a Requisite Majority of Non-Kirin Shareholders lion approve the Scheme at the Scheme Meeting. Non-Kirin Shareholder means a person who is registered in the 29 Share Register as the holder of a Share as at the Scheme Special Dividend Record Date means 7.00pm on the date for Record Date, other than an Excluded Shareholder. determining entitlements to receive the Special Dividend, expected to be 25 September 2009. (Shares will trade ex- NPAT means net profit after tax. entitlement on 21 September 2009 and Shares acquired on that NZCC means the New Zealand Commerce Commission. date will not be entitled to the Special Dividend).
NZD means New Zealand dollars. Subsidiary has the meaning given to it in the Corporations Act.
NZSX means the main board equity security market operated Superior Proposal has the meaning given to that term in the by NZX. Implementation Agreement.
NZX means NZX Limited. VWAP means volume weighted average price.
OIO means Overseas Investment Office. 7.2 Interpretation
Qualifying Achievement Right is an Achievement Right which In this Scheme Booklet (other than the Appendices): has vested in accordance with the Board’s determination and (a) Except as otherwise provided, all words and phrases used the ARP Rules or ARP(NZ) Rules, as applicable. in this Scheme Booklet have the meanings (if any) given to Related Body Corporate has the meaning given to it in the them by the Corporations Act. Corporations Act. (b) Headings are for ease of reference only and will not affect Requisite Majority means the threshold for approval of a the interpretation of this Scheme Booklet. resolution on a scheme of arrangement between a body and its (c) Words importing the singular, where the context requires, members under Part 5.1 of the Corporations Act, being votes ‘in include the plural and vice versa and words importing any favour’ of the resolution received from: gender include all genders. A reference to a person includes (a) unless the Court orders otherwise, a majority in number (more a reference to a corporation. than 50%) of the members, who are present and voting, either (d) All dates and times are Sydney, Australia times. in person or by proxy, attorney or in the case of a corporation its duly appointed corporate representative; and (e) A reference to $, A$, AUD and cents is to Australian currency, unless otherwise stated. (b) at least 75% of the votes cast on the resolution. (f) A reference to a Section or Annexure is to a Section or Scheme Booklet means this scheme booklet. Annexure in this Scheme Booklet, unless stated otherwise. lion nathan SCHEME BOOKLET 2009
Annexure A - Implementation Agreement
Implementation Agreement
DATED 10 MAY 2009
contents
Details 28 14 Notices and other communications 39 General terms 29 15 Goods and services tax (GST) 40 1 Definitions and interpretation 29 16 Miscellaneous 40 2 Agreement to propose and implement Scheme 33 Schedule 1 - Conditions Precedent (clause 3.1) 42 3 Conditions precedent 33 Schedule 2 - Timetable (clause 5.1) 43 4 Scheme 35 Schedule 3 - Lion Nathan’s Obligations (clause 5.2) 44 5 Co-operation and timing 35 Schedule 4 - Kirin’s Obligations (clause 5.3) 45 6 Scheme Booklet 36 Schedule 5 - Lion Nathan’s representations and 7 Conduct of business 37 warranties (clause 8.1) 46 8 Representations and warranties 38 Schedule 6 - Kirin’s representations and warranties (clause 8.4) 47 9 Court proceedings 38 Signing page 48 10 Termination 39 Annexure B - Scheme 49 11 Standstill 39 Annexure C - Kirin Deed Poll 55 12 Public announcements 39 13 Confidential Information 39 limite d 2009
details nathan
Parties Kirin and Lion Nathan lion
30 Kirin Name Kirin Holdings Company, Limited Incorporated in Japan Address c/- Blake Dawson [Ref: 02-2005-5192] 225 George Street Sydney NSW 2000 Telephone 61-2-9258-6000 Fax 61-2-9258-6999 Attention Ian Williams / David Ryan / Carl Della-Bosca
Lion Nathan Name Lion Nathan Limited ABN/ACN/ARBN 34 093 160 448 Incorporated in Australia Address Level 7, 68 York Street, Sydney, NSW, 2000, Australia Telephone 61-2-9320-2200 Fax 61-2-9320-2264 Attention General Counsel and Company Secretary
Recitals A Lion Nathan and Kirin have agreed that Lion Nathan will become a wholly owned subsidiary of Kirin by means of a members’ scheme of arrangement under Part 5.1 of the Corporations Act.
B At the request of Kirin, Lion Nathan intends to propose the Scheme and issue the Scheme Booklet
C Lion Nathan and Kirin have agreed to implement the Scheme on the terms and conditions of this agreement.
Governing law New South Wales
Date of agreement See Signing page LION NATHAN SCHEME BOOKLET 2009
General terms
1. Definitions and interpretation For the purposes of paragraph (a)(i) above, a subsidiary of Lion Nathan will be a material subsidiary if: 1.1 Definitions (1) the business or property of the subsidiary contributes These meanings apply unless the contrary intention appears. 50% or more of the consolidated net profit after tax of ACCC means the Australian Competition and Consumer Lion Nathan; or Commission. (2) the business or property of the subsidiary represents 50% ACCC Approval means the occurrence of any of the following: or more of the total consolidated assets of Lion Nathan.
(a) the ACCC has not commenced or threatened to commence For the purposes of paragraph (a)(ii) above, the acquisition of an proceedings to restrain the Transaction; or interest in the business or property of Lion Nathan or any of its subsidiaries will be material if: (b) the ACCC has advised Kirin in writing that it does not intend to oppose, intervene or seek to prevent the implementation (1) the relevant business or property contributes 50% or more of the Transaction under or by reference to section 50 of of the consolidated net profit after tax of Lion Nathan; or the Trade Practices Act 1974 (Cth), which notification is (2) the business or property represents 50% or more of the either unconditional or subject to conditions that are total consolidated assets of Lion Nathan. acceptable to Kirin. Conditions Precedent means the conditions precedent set out Accounting Standards means: in schedule 1. (a) accounting standards approved under the Corporations Act Confidentiality Deed means the Confidentiality Deed between and its requirements about the preparation and content of Kirin and Lion Nathan dated on or about 26 April 2009. accounts; and Controller has the meaning it has in the Corporations Act. (b) generally accepted accounting principles, policies practices and procedures in Australia. Corporations Act means the Corporations Act 2001 (Cwlth).
ASIC means the Australian Securities & Investments Corporations Regulations means the Corporations Regulations Commission. 2001 (Cwlth).
ASX means ASX Limited (ABN 98 008 624 691), Australian Court means the Federal Court of Australia (New South Wales Securities Exchange or the Australian Stock Exchange as registry), or such other court of competent jurisdiction under
appropriate. the Corporations Act agreed in writing by the parties. limite d 2009
Authorisation means: Details means the section of this agreement headed “Details”.
(a) an approval, authorisation, consent, declaration, exemption, Due Diligence Materials means the written information and nathan licence, notarisation, permit or waiver, however it is documents made available to Kirin by Lion Nathan before the
described, and including any condition attaching to it; and date of this agreement in a physical data room maintained at the lion offices of Mallesons Stephen Jaques, at Governor Phillip Tower, (b) in relation to anything that could be prohibited or restricted 31 1 Farrer Place, Sydney NSW between the dates of Saturday by law if a Regulatory Authority acts in any way within a 25 April 2009 and Thursday 30 April 2009. specified period, the expiry of that period without that action being taken, Effective, when used in relation to the Scheme, means the coming into effect, pursuant to section 411(10) of the including any renewal or amendment. Corporations Act, of the order of the Court made under Authorised Officer means, in respect of a party, a director or section 411(4)(b) of the Corporations Act in relation to the secretary of the party or any other person appointed by a party Scheme, but in any event at no time before an office copy of to act as an Authorised Officer under this agreement. the order of the Court is lodged with ASIC.
Business Day means a business day as defined in the Effective Date in relation to the Scheme means the date Listing Rules. on which the Scheme becomes Effective.
Competing Transaction means a transaction which, if End Date means 31 December 2009 or such other date as Kirin completed, would mean a person (other than Kirin or its and Lion Nathan agree. Related Bodies Corporate or Representatives) would: Excluded Shareholder means any Lion Nathan Shareholder (a) directly or indirectly, acquire an interest, a Relevant Interest who is Kirin or a Related Body Corporate of Kirin. in or become the holder of: FIRB means the Foreign Investment Review Board. (i) more than 10% of the shares in Lion Nathan or more First Court Date means the first day on which an application than 10% of the shares in any of Lion Nathan’s material made to the Court, in accordance with item 10 of schedule 3, for subsidiaries; or orders under section 411(1) of the Corporations Act convening (ii) the whole or a material part of the business or property the Members’ Scheme Meeting to consider the Scheme is heard. of Lion Nathan or any of its material subsidiaries; Implementation Date means the fifth Business Day following the (b) acquire control of Lion Nathan, within the meaning of section Scheme Record Date or such other date as is agreed by Kirin 50AA of the Corporations Act; or and Lion Nathan.
(c) otherwise acquire or merge (including by way of a reverse Incoming Directors means each person nominated in writing takeover bid or dual listed companies structure) with by Kirin to Lion Nathan prior to the Second Court Date to be Lion Nathan. appointed to the Lion Nathan Board. lion nathan SCHEME BOOKLET 2009
General terms continued
Independent Expert means any independent expert approved standard completion conditions precedent relating to formal by Kirin and appointed by Lion Nathan under item 3 of schedule matters concerning the drawdown of the funding. 3 to prepare the Independent Expert Report stating whether, in Kirin Indemnified Parties means Kirin, its officers, employees the expert’s opinion the Scheme is in the best interest of Scheme and advisers, its Related Bodies Corporate and the officers, Participants. employees and advisers of each of its Related Bodies Independent Expert’s Report means the report prepared by Corporate. the Independent Expert. Kirin Information means the information regarding Kirin as A person is Insolvent if: is required to be included in the Scheme Booklet under the Corporations Act, the Corporations Regulations, the Listing (a) it is (or states that it is) an insolvent under administration Rules or ASIC Regulatory Guide 60 or 142. For the avoidance or insolvent (each as defined in the Corporations Act); of doubt, Kirin Information does not include information about (b) it is in liquidation, in provisional liquidation, under the Lion Nathan Group except to the extent it relates to any administration or wound up or has had a Controller statement of Kirin’s intentions relating to the Lion Nathan appointed to any part of its property; Group following the Effective Date, provided that Kirin has consented in writing to the inclusion of such statements in the (c) it is subject to any arrangement, assignment, moratorium Scheme Booklet. or composition, protected from creditors under any statute or dissolved (in each case, other than to carry out a Kirin Nominee Directors means Senji Miyake, Hirotake reconstruction or amalgamation while solvent on terms Kobayashi, and Fumio Miki. approved by the other parties to this agreement); Kirin Payment means the amount of A$11.50 per Lion Nathan (d) an application or order has been made (and in the case of an Share, less the Kirin Payment Adjustment Amount (if any). application, it is not stayed, withdrawn or dismissed within Kirin Payment Adjustment Amount means the amount of any 30 days), resolution passed, proposal put forward, or any dividends or distributions declared or announced by Lion Nathan other action taken, in each case in connection with that prior to the Implementation Date, except for the Special Payment person, which is preparatory to or could result in any of (a), and the Interim Dividend. (b) or (c) above; Lion Nathan has the meaning given in the Details. (e) it is taken (under section 459F(1) of the Corporations Act) to have failed to comply with a statutory demand; Lion Nathan Achievement Right means an Achievement Right limite d 2009 as defined in the Lion Nathan Achievement Rights Plan or any (f) it is the subject of an event described in section 459C(2)(b) right awarded under the Share Scheme Section of the or section 585 of the Corporations Act (or it makes a Lion Nathan Employee Benefit Plan (New Zealand), as amended
nathan statement from which another party to this agreement from time to time. reasonably deduces it is so subject);
lion Lion Nathan Achievement Rights Plan means the Lion Nathan (g) it is otherwise unable to pay its debts when they fall due; or Achievement Rights Plan established by Lion Nathan, as 32 (h) something having a substantially similar effect to (a) to (g) amended from time to time. happens in connection with that person under the law of any Lion Nathan Board means the board of directors of Lion Nathan jurisdiction. as constituted from time to time. Interim Dividend means the amount of A$0.22 per Lion Nathan Lion Nathan Director means a director on the Lion Nathan Share referred to in clause 4.2(d). Board. Interim Dividend Payment Date means such date for payment Lion Nathan Employee Share Acquisition Plan means: of the Interim Dividend as determined by the Lion Nathan Board. (a) the employee share scheme entitled the Lion Nathan Interim Dividend Record Date means the date for determining Employee Share Acquisition Plan established by Lion Nathan, entitlements to receive the Interim Dividend as determined by under which eligible employees may be granted Lion Nathan the Lion Nathan Board. Shares; and ITAA 97 means the Income Tax Assessment Act 1997 (Cth). (b) the Employee Share Benefit Section of the Lion Nathan Kirin has the meaning given in the Details. Employee Benefit Plan (New Zealand).
Kirin Board means the board of directors of Kirin as constituted Lion Nathan Group means Lion Nathan and its Subsidiaries. from time to time. Lion Nathan Group Director means a director on the board of Kirin Deed Poll means a deed poll to be executed by Kirin a company which is a member of the Lion Nathan Group. Holdings Company, Limited substantially in the form set out in Lion Nathan Indemnified Parties means Lion Nathan, its Annexure B of this agreement, or as otherwise agreed by Kirin officers, employees, and advisers and its Related Bodies and Lion Nathan. Corporate and the officers, employees and advisers of each Kirin Director means a director on the Kirin Board as of its Related Bodies Corporate. constituted from time to time. Lion Nathan Information means all information contained in Kirin Funding Commitment means the securing of financial the Scheme Booklet other than the Kirin Information and the accommodation by Kirin pursuant to enforceable agreements, Independent Expert’s Report. under which one or more banks or financial institutions agree Lion Nathan Register means the register of members of to provide committed funding to finance the acquisition of the Lion Nathan maintained by or on behalf of Lion Nathan in Scheme Shares pursuant to the Scheme, subject only to accordance with section 168(1) of the Corporations Act. LION NATHAN SCHEME BOOKLET 2009
Lion Nathan Share means an issued fully paid ordinary share in (ii) resolving to approve the terms of a buy-back agreement the capital of Lion Nathan. under the Corporations Act;
Lion Nathan Shareholder means each person who is registered (e) a member of Lion Nathan Group issuing securities, or in the Lion Nathan Register as a holder of Lion Nathan Shares. granting an option (including a Lion Nathan Achievement Right or other performance right) over its securities, or Listing Rules means the Listing Rules of the ASX. agreeing to make such an issue or grant such an option Losses means all claims, demands, damages, losses, costs, (including a Lion Nathan Achievement Right or other expenses and liabilities. performance right), other than any issue or grant by Lion Nathan pursuant to or consistent with arrangements Management Responses means the written responses entered into before the date of this agreement (including provided to Kirin by Lion Nathan and its advisers in response invitations or offers made, and terms of participation, under to questions submitted by Kirin and its advisers before the date the Lion Nathan Employee Share Acquisition Plan and the of this agreement which have been agreed and initialled by the Lion Nathan Achievement Rights Plan); parties for the purposes of identification. (f) a member of Lion Nathan Group issuing or agreeing to issue Material means, in relation to the concept of materiality, securities or other instruments convertible into equity or something reasonably likely to influence the decision of a bidder debt securities; for Lion Nathan Shares in the position of Kirin whether or not to proceed with the Transaction. (g) a member of Lion Nathan Group adopting a constitution or making any change or amendment to its existing Material Adverse Event means Specified Events which constitution; individually, or when aggregated with all Specified Events, have resulted in, or could reasonably be expected to result in: (h) a member of Lion Nathan Group becoming Insolvent (other than a member of the Lion Nathan Group currently in (a) the value of the consolidated net assets of the Lion Nathan liquidation), Group being reduced by $90 million or more; or provided that a Prescribed Event will not include an event: (b) the value of consolidated annual net profit after tax of the Lion Nathan Group being reduced by $30 million or more. (i) which is required to be done or procured by Lion Nathan pursuant to this agreement or the Scheme; Members’ Scheme Meeting means the meeting to be convened by the Court at which Scheme Participants will vote on the (j) the occurrence of which has been approved in writing by
Scheme. Kirin prior to the event occurring; limite d 2009
Merger Payment means the aggregate of the Kirin Payment, (k) that has been fully and fairly disclosed in writing by the Special Payment and the Interim Dividend referred to in Lion Nathan to Kirin before the date of this agreement; clause 4.2(a). nathan (l) which involves a declaration or determination relating to,
Nominee has the meaning given to that term in clause 2.4. or payment of, the Special Payment or Interim Dividend; or lion
NZCC means the New Zealand Commerce Commission. (m) which relates to an inter-company transaction done or 33 agreed to be done solely between Lion Nathan or any NZCC Approval means the occurrence of any of the following: member of the Lion Nathan Group and another member (a) the NZCC has not commenced or threatened to commence or members of the Lion Nathan Group. proceedings to restrain the Transaction; or Regulator’s Draft means the draft of the Scheme Booklet in a (b) the NZCC has given clearance, or has granted authorisation, form acceptable to both parties which is provided to ASIC for under the Commerce Act 1986 (Commerce Act) to the approval pursuant to section 411(2) of the Corporations Act. Transaction or the transfer of the Scheme Shares to Kirin Regulatory Approval means any approval of a Regulatory or implementation of this agreement otherwise being or Authority which Kirin and Lion Nathan reasonably agree is becoming lawful under the Commerce Act. necessary to implement any material aspect of the Transaction. NZX means NZX Limited or the securities market which it Regulatory Authority includes: operates, as the context requires. (a) ASX, ACCC, ASIC, NZCC, NZX, FIRB, OIO; OIO means Overseas Investment Office. (b) a government or governmental, semi-governmental or Prescribed Event means the occurrence of any of the following: judicial entity or authority including a Tax Authority; (a) a member of Lion Nathan Group converting all or any of its (c) a minister, department, office, commission, delegate, securities into a larger or smaller number of securities; instrumentality, agency, board, authority or organisation of (b) a member of Lion Nathan Group resolving to reduce its any government; and capital in any way or reclassifying, combining, splitting or (d) any regulatory organisation established under statute. redeeming or repurchasing directly or indirectly any of its securities; Regulatory Review Period means the period from the date on which the Regulator’s Draft is submitted to ASIC to the date on (c) a member of Lion Nathan Group declaring, paying or which ASIC confirms that it does not intend to make any distributing any dividend, bonus or other share of its profits submissions at the Court hearing on the First Court Date or or assets by way of dividend, capital reduction or otherwise otherwise object to the Scheme. (or announcing an intention to do so); Related Body Corporate has the meaning it has in the (d) a member of Lion Nathan Group: Corporations Act. (i) entering into a buy-back agreement; or lion nathan SCHEME BOOKLET 2009
General terms continued
Relevant Interest has the same meaning as given by sections (a) occurs or fails to occur after the date of this agreement; 608 and 609 of the Corporations Act. (b) occurs or fails to occur before the date of this agreement Representative means, in relation to a party: but is only disclosed to Kirin, announced or publicly disclosed after the date of this agreement; or (a) a Related Body Corporate; (c) will or is likely to occur after the date of this agreement and (b) a director, officer or employee of the party or any of the which has not been publicly announced or disclosed to Kirin party’s related bodies corporate; or prior to the date of this agreement, (c) an adviser to the party or any of the party’s related bodies but excludes: corporate, where an “adviser” means, in relation to an entity, a financier, financial adviser, corporate adviser, legal (a) any announcement, decision, determination, proposed adviser, or technical or other expert adviser or consultant change to legislation or regulations, or ruling issued by a who provides advisory services in a professional capacity Regulatory Authority (including in relation to Tax) which does to the market in general and who has been engaged by that not relate specifically to Lion Nathan’s business; entity. (b) any declaration or determination relating to, or payment of, Resigning Director means each Lion Nathan Director nominated the Special Payment or Interim Dividend; or in writing by Kirin to the Lion Nathan Board prior to the Second (c) the de-recognition of any tax losses that arise from the Court Date as being required to resign from the Lion Nathan Transaction. Board. Standstill Period means the period commencing on the date of Scheme means the scheme of arrangement between this agreement and ending on the earlier of: Lion Nathan and Scheme Participants under which all the Scheme Shares will be transferred to Kirin under Part 5.1 of the (a) the termination of this agreement in accordance with its Corporations Act substantially in the form set out in Annexure A terms; and to this agreement, or as otherwise agreed by Kirin and (b) the date on which a Competing Transaction is publicly Lion Nathan, subject to any amendment or condition made announced. pursuant to section 411(6) of the Corporations Act. Subsidiaries has the meaning it has in the Corporations Act. Scheme Booklet means, in respect of the Scheme, the information booklet to be approved by the Court and Superior Proposal means a bona fide Competing Transaction limite d 2009 despatched to Scheme Participants which must: that is publicly announced after the date of this agreement and which the Lion Nathan Board (other than the Kirin Nominee (a) include the Scheme, the Kirin Deed Poll, the Independent Directors), acting in good faith, and acting reasonably, after
nathan Expert’s Report and the notice of meeting and proxy form; taking advice from its legal and financial advisers, determines is: and
lion (a) reasonably capable of being completed taking into account (b) include an explanatory statement that complies with the all aspects of the Competing Transaction; and 34 Corporations Act, Corporations Regulations, ASIC Regulatory Guide 60 and 142 and the Listing Rules. (b) of higher financial value and more favourable to Scheme Participants than the Scheme, taking into account all terms Scheme Participant means each person who is a Lion Nathan and conditions of the Competing Transaction. Shareholder as at the Scheme Record Date, other than an Excluded Shareholder. Ta x means all forms of taxes, duties, imposts, charges, withholdings, rates, levies, clawbacks or other governmental Scheme Record Date means 7.00pm on the fifth Business Day impositions of whatever nature and by whatever authority following the Effective Date or such other date (after the imposed, assessed or charged together with all costs, charges, Effective Date) as Lion Nathan and Kirin agree. interest, penalties, fines and other additional statutory charges Scheme Shares means all Lion Nathan Shares held by Scheme incidental or related to the imposition, assessment or charge of Participants as at the Scheme Record Date and for the those amounts. avoidance of doubt includes any Lion Nathan Shares issued on Tax Authority means any governmental authority responsible or before the Scheme Record Date, including upon the exercise for the imposition, collection or recovery of any Tax. of any Lion Nathan Achievement Rights. Timetable means the timetable set out in schedule 2, subject to Second Court Date means the day on which the Court makes any amendments as the parties may agree in writing. an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme. Transaction means the acquisition by Kirin of all the issued shares in Lion Nathan that Kirin does not already own, through Special Payment means the amount of A$0.50 per Lion Nathan the implementation of the Scheme and the other transactions Share referred to in clause 4.2(c). contemplated by this agreement, including the payment of the Special Payment Date means such date for payment of the Special Payment and the payment of the Interim Dividend. Special Payment as determined by the Lion Nathan Board Treasurer means the Treasurer of the Commonwealth following agreement between Lion Nathan and Kirin, pursuant to of Australia. clause 4.3(d). 1.2 References to certain general terms Special Payment Record Date means the date for determining entitlements to receive the Special Payment as determined by Unless the contrary intention appears, a reference in this the Lion Nathan Board following agreement between Lion Nathan agreement to: and Kirin, pursuant to clause 4.3(d). (a) (variations or replacement) a document (including this Specified Events means an event, occurrence or matter that: agreement) includes any variation or replacement of it; LION NATHAN SCHEME BOOKLET 2009
(b) (clauses, annexures and schedules) a clause, annexure or 1.5 Headings schedule is a reference to a clause in or annexure or Headings (including those in brackets at the beginning of schedule to this agreement; paragraphs) are for convenience only and do not affect the (c) (reference to statutes) a statute, ordinance, code or other interpretation of this agreement. law includes regulations and other instruments under it and 2. Agreement to propose and implement Scheme consolidations, amendments, re-enactments or replacements of any of them; 2.1 Agreement to implement Transaction
(d) (law) law means common law, principles of equity, and laws The parties agree to implement the Transaction on the terms and made by parliament (and laws made by parliament include conditions of this agreement. State, Territory and Commonwealth laws and regulations 2.2 Lion Nathan to propose Scheme and other instruments under them, and consolidations, amendments, re-enactments or replacements of any Lion Nathan agrees to propose the Scheme on and subject to of them); the terms and conditions of this agreement.
(e) (singular includes plural) the singular includes the plural 2.3 Kirin to assist with the Scheme and vice versa; Kirin agrees to assist Lion Nathan to propose the Scheme on (f) (person) the word “person” includes an individual, a firm, and subject to the terms and conditions of this agreement. a body corporate, a partnership, a joint venture, an 2.4 Kirin nominee unincorporated body or association, or any Regulatory Authority; Despite anything else in this agreement, Kirin may by notice to Lion Nathan not later than 5 Business Days before the (g) (executors, administrators, successors) a particular Regulator’s Draft is submitted to ASIC, nominate a wholly owned person includes a reference to the person’s executors, Subsidiary of Kirin (“Nominee”) to pay the Kirin Payment and to administrators, successors, substitutes (including persons which the Scheme Shares will be transferred in accordance with taking by novation) and assigns; clause 4 if the Scheme becomes Effective. (h) (party) a reference to a party to a document includes that From the date of receipt by Lion Nathan of the notice party’s successors and permitted assigns; (“Notification Date”): (i) (reference to a group of persons) a group of persons or (a) the parties agree that references to Kirin in this agreement
things is a reference to any two or more of them jointly and limite d 2009 (other than references to Kirin in the Details and in clauses to each of them individually; 4.4 and 4.5 and clause 5.3 insofar as it relates to items 1, 2 (j) (asset) a reference to an asset includes all property of any and 8 of schedule 4) will be construed as references to the nature, including, but not limited to, a business, and all rights, Nominee (without the need for further amendment); and nathan revenues and benefits; (b) Kirin must procure that the Nominee complies with this lion (k) (dollars) Australian dollars, dollars, A$ or $ is a reference to agreement as if the Nominee were a party to it in place 35 the lawful currency of Australia; of Kirin.
(l) (calculation of time) a period of time dating from a given day Despite the above, Kirin will continue to be bound by all of the or the day of an act or event, is to be calculated exclusive of obligations of Kirin under this agreement and will not be released that day; from any obligations or liabilities under this agreement following the Notification Date. However, Lion Nathan agrees that Kirin will (m) (defined meaning) where a word or phrase is given a not be in breach of this agreement for failing to discharge the defined meaning, any other part of speech or grammatical obligation of Kirin under this agreement if the Nominee fully form of that word or phrase has a corresponding meaning; discharges that obligation. (n) (reference to a day) a day is to be interpreted as the period 2.5 Right to proceed by takeover bid of time commencing at midnight and ending 24 hours later; Kirin may propose, at any time prior to the date that the (o) (accounting terms) an accounting term is a reference to Regulator’s Draft is provided to ASIC for approval pursuant to that term as it is used in the Accounting Standards; section 411(2) of the Corporations Act, that the Transaction be (p) (meaning not limited) the words “include”, “including”, “for implemented by way of a takeover bid pursuant to Chapter 6 example” or “such as” when introducing an example, do not of the Corporations Act on the same commercial terms and limit the meaning of the words to which the example relates conditions of the Scheme. If Kirin proposes that this alternative to that example or examples of a similar kind; and be pursued in that way, the parties must discuss and seek to agree in good faith an agreement to proceed in that way. If that (q) (time of day) time is a reference to Sydney time. agreement is reached, the parties must promptly amend this 1.3 Next day agreement to reflect that revised transaction structure or enter into a new agreement reflecting that transaction structure. If an act under this agreement to be done by a party on or by a given day is done after 5.30 pm on that day, it is taken to be 3. Conditions precedent done on the next day. 3.1 Conditions precedent 1.4 Next Business Day Subject to this clause 3, the Scheme will not become Effective If an event must occur on a stipulated day which is not a and the obligations of Kirin under clause 4.4 are not binding Business Day then the stipulated day will be taken to be the next unless each of the Conditions Precedent contained in schedule 1 Business Day. are satisfied or waived to the extent and in the manner set out in clauses 3.2, 3.3 and 3.4. lion nathan SCHEME BOOKLET 2009
General terms continued
3.2 Benefit of certain Conditions Precedent (b) (notice of failure) immediately give written notice to the other of a breach or non-fulfilment of a Condition Precedent, A Condition Precedent may only be waived in writing by a party or of any event which will prevent a Condition Precedent entitled to the benefit of that Condition Precedent as noted in the being satisfied; and table set out in schedule 1 and will be effective only to the extent specifically set out in that waiver. (c) (notice of waiver) upon receipt of a notice given under sub-clause 3.6(b), give written notice to the other party as A party entitled to waive the breach or non-fulfilment of a soon as possible (and in any event before 8.00am on the Condition Precedent under this clause 3.2 may do so in its Business Day before the Second Court Date) as to whether absolute discretion. or not it waives the breach or non-fulfilment of any Condition 3.3 Waiver of Conditions Precedent Precedent resulting from the occurrence of that event, specifying the Condition Precedent in question. If either Lion Nathan or Kirin waives the breach or non-fulfilment of a Condition Precedent in accordance with this clause, then: 3.7 Effect of waiver or non-fulfilment
(a) subject to subclause 3.3(b), that waiver precludes that party A waiver of such breach or non-fulfilment in respect of one from suing the other for any breach of this agreement Condition Precedent does not constitute: arising as a result of the breach or non-fulfilment of that (a) a waiver of the breach or non-fulfilment of any other Condition Precedent or arising from the same event which Condition Precedent resulting from the same event; or gave rise to the breach or non-fulfilment of that Condition Precedent; but (b) a waiver of the breach or non-fulfilment of that Condition Precedent resulting from any other event. (b) if the waiver of the Condition Precedent is itself conditional and the other party: 3.8 Consultation on failure of Condition Precedents
(i) accepts the condition, the terms of that condition apply If: notwithstanding any inconsistency with (a) there is a breach or non-fulfilment of a Condition Precedent subclause 3.3(a); or which is not waived in accordance with this agreement by (ii) does not accept the condition, the Condition Precedent any time or date specified in this agreement for the has not been waived. satisfaction of the Condition Precedent;
3.4 Reasonable endeavours (b) there is an act, failure to act or occurrence which will limite d 2009 prevent a Condition Precedent being satisfied by any time or Each of Lion Nathan and Kirin agree to use reasonable date specified in this agreement for the satisfaction of the endeavours to procure that: Condition Precedent (and the breach or non-fulfilment which nathan (a) each of the Conditions Precedent for which they are would otherwise occur has not already been waived in responsible, as noted in the table set out in schedule 1: accordance with this agreement); or lion (i) is satisfied as soon as practicable after the date of this (c) if the Scheme has not become Effective by the End Date, 36 agreement; and then the parties must consult in good faith with a view to (ii) continues to be satisfied at all times until the last time it determining whether: is to be satisfied as noted in the table set out in schedule (d) the Scheme may proceed by way of alternative means or 1 (as the case may require); and methods; (b) there is no occurrence that would prevent the Conditions (e) to extend the relevant time for satisfaction of the Condition Precedent for which they are responsible, as noted in the Precedent or to adjourn or change the date of an application table set out in schedule 1, being satisfied. to the Court; or 3.5 Regulatory matters (f) to extend the End Date. Without limiting clause 3.4, each party: 3.9 Failure to agree (a) (Regulatory Approvals) must promptly apply for all relevant If the parties are unable to reach agreement under clause 3.8 Regulatory Approvals and take all steps it is responsible for within 5 Business Days (or any shorter period ending at 8.00am as part of the approval process for the Scheme, including on the Business Day before the Second Court Date): responding to requests for information at the earliest practicable time; and (a) subject to subclause 3.9(b), either party may terminate this agreement (and such termination will be in accordance with (b) (consultation) must use its reasonable endeavours to clause 10.1(e)(i)); or consult with the other party in advance in relation to all material communications with any Regulatory Authority (b) if a Condition Precedent may be waived and exists for the relating to any Regulatory Approval. benefit of one party only, that party only may waive that Condition Precedent or terminate this agreement (and such 3.6 Notices in relation to Conditions Precedent termination will be in accordance with clause 10.1(e)(ii)); Each party must: in each case before 8.00am on the Second Court Date. A party (a) (notice of satisfaction) promptly notify the other of will not be entitled to terminate this agreement pursuant to this satisfaction of a Condition Precedent and must keep the clause 3.9 if the relevant Condition Precedent has not been other informed of any material development of which it satisfied or agreement cannot be reached as a result of: becomes aware that may lead to the breach or non- (c) a breach of this agreement by that party; or fulfilment of a Condition Precedent; (d) a deliberate act or omission of that party. LION NATHAN SCHEME BOOKLET 2009
3.10 Regulatory Approval and comment on any ruling applications and to attend and participate in any meetings with any Tax Authorities), A Regulatory Approval will be regarded as having been obtained provided this does not result in any unreasonable delay notwithstanding that a condition or conditions may have been having regard to the priority ruling process. attached to that Regulatory Approval if that condition is reasonably satisfactory to Kirin. (f) Lion Nathan will impute the Special Payment only to the extent of available New Zealand imputation credits. 4. Scheme Lion Nathan must discuss and co-operate in good faith with 4.1 Scheme Kirin with respect to any decisions that relevantly affect the New Zealand imputation credit position of the Lion Nathan Subject to the terms and conditions of this agreement, Group, in relation to the current New Zealand imputation Lion Nathan agrees to propose the Scheme to Scheme year ending 31 March 2010. Participants under which: 4.4 Kirin Payment (a) all of the Scheme Shares will be transferred to Kirin; and Kirin covenants in favour of Lion Nathan (in its own right and on (b) Scheme Participants will receive the Kirin Payment as set behalf of each Scheme Participant) that in consideration of the out in clause 4.2(b). transfer to Kirin of each Lion Nathan Share held by a Scheme 4.2 Payments Participant, Kirin will, on the date being two Business Days before the Implementation Date, pay to a trust account operated (a) The Merger Payment payable pursuant to the Transaction by Lion Nathan (as agent for each Scheme Participant) an will be A$12.22 per Lion Nathan Share as set out below. amount equal to the aggregate of the Kirin Payment payable for The parties agree that Kirin is not responsible for paying all the Scheme Shares in accordance with the Scheme. the Interim Dividend or the Special Payment. 4.5 Undertakings held as agent (b) Pursuant to the Scheme, Scheme Participants will receive the Kirin Payment for each Lion Nathan Share held by them Lion Nathan acknowledges that the undertaking by Kirin in at the Scheme Record Date in accordance with the Scheme clause 4.4 is given to Lion Nathan in its capacity as agent for and the Kirin Deed Poll. each Scheme Participant.
(c) Subject to clause 4.3, Lion Nathan will pay holders of 4.6 Payment to Scheme Participants Lion Nathan Shares as at the Special Payment Record Date Lion Nathan must: an amount of A$0.50 per Lion Nathan Share as a special payment on the Special Payment Date. (a) receive in a trust account in accordance with the Scheme limite d 2009 and as agent for each Scheme Participant, the amount paid (d) Lion Nathan will pay each holder of Lion Nathan Shares as at in accordance with clause 4.4 ;
the Interim Dividend Record Date an amount of A$0.22 per nathan Lion Nathan Share as an interim dividend on the Interim (b) pay to each Scheme Participant such moneys as each
Dividend Payment Date. Scheme Participant is entitled to receive in accordance with lion the Scheme; and 4.3 Tax Rulings and Franking of Special Payment and Interim 37 Dividend (c) otherwise comply with its obligations under the Scheme.
(a) Subject to paragraph 4.3(b), 4.3(c) and 4.3(d), the parties 5. Co-operation and timing intend that the amount of the franking credit allocated to 5.1 General obligations the Special Payment and the Interim Dividend will be the maximum franking credit worked out using the formula in Lion Nathan and Kirin must each: section 202-60(2) of the ITAA 97. (a) use all reasonable endeavours and commit necessary (b) Lion Nathan will frank the Interim Dividend and Special resources (including management and corporate relations Payment only to the extent that it does not cause resources and the resources of external advisers); and Lion Nathan’s franking account to be in deficit (as defined (b) procure that its officers and advisers work in good faith and in section 205-40(2) of the ITAA 97) at the times set out in in a timely and co-operative fashion with the other party sections 205-45 and 709-60(3) of the ITAA 97. (including by attending meetings and by providing (c) Lion Nathan must provide Kirin with franking account information), information that is reasonably requested by Kirin. to produce the Scheme Booklet and implement the Scheme as (d) The parties acknowledge and agree that matters in relation soon as reasonably practicable and in accordance with the to the Special Payment are subject to further consultation Timetable. and agreement between the parties. The parties must 5.2 Lion Nathan’s obligations discuss and co-operate in good faith with each other in reaching agreement with respect to these matters. These Lion Nathan must comply with the obligations of Lion Nathan matters include, but are not limited to, the form and manner set out in schedule 3 and take all reasonable steps that are of the Special Payment. Lion Nathan undertakes and agrees necessary or reasonably requested by Kirin to implement the that it will not make the Special Payment otherwise than in Scheme as soon as is reasonably practicable and in the most accordance with the agreement of Kirin. efficient manner for Scheme Participants and in any event prior to the End Date. (e) The parties must discuss and co-operate in good faith in relation to any applications for any rulings to a Tax Authority 5.3 Kirin’s obligations in connection with the Transaction and in the conduct of any Kirin must comply with the obligations of Kirin set out in such ruling application and determination (including, without schedule 4 and take all reasonable steps that are necessary limitation, by allowing Kirin and/or its legal advisers to review or reasonably requested by Lion Nathan to assist Lion Nathan lion nathan SCHEME BOOKLET 2009
General terms continued
to implement the Scheme as soon as is reasonably practicable 5.7 Cooperation and consultation and in the most efficient manner for Scheme Participants and in Lion Nathan must use its best endeavours to involve Kirin in any event prior to the End Date. meetings or discussions with third parties relating to the 5.4 Access to people and Lion Nathan information obtaining of any Authorisation or third party consent required by Kirin under clause 5.6 and without limitation must: Between the date of this agreement and the earlier of Implementation Date and the date this agreement is terminated, (a) keep Kirin informed of progress in obtaining any such Lion Nathan must: Authorisation or third party consent;
(a) as soon as reasonably practicable provide Kirin and its (b) provide Kirin with drafts of any material written officers and advisers with any documents, records, and communications to be sent to any person in relation to other information (subject to any existing confidentiality the Authorisation or third party consent and make such obligations owed to third parties, or applicable privacy laws) amendments as Kirin reasonably requires; and reasonably requested by them; (c) provide copies of any written communications sent to or (b) provide Kirin and its officers and advisers with reasonable received from a third party in relation to an Authorisation or access to Lion Nathan’s officers and advisers which Kirin third party consent promptly upon despatch or receipt (as reasonably requires, including for the purposes of: the case may be),
(i) implementing the Scheme; in each case to the extent it is reasonable to do so.
(ii) preparing for carrying on the business of Lion Nathan 5.8 Kirin’s right to separate representation following implementation of the Scheme, including any Kirin is entitled to separate representation at all Court changes in ownership structure or any restructuring of proceedings relating to the Scheme. Nothing in this agreement the business following implementation of the Scheme in is to be taken to give Lion Nathan any right or power to make or accordance with Kirin’s plans; give undertakings to the Court for or on behalf of Kirin. (iii) determining the ownership, tax and financing structure 5.9 Scheme Booklet responsibility statements of Kirin or its Related Bodies Corporate in respect of the Transaction; and The responsibility statement to appear in the Scheme Booklet, in a form to be agreed by the parties will contain words to the (iv) any other purpose which is agreed in writing between effect of: limite d 2009 the parties, (a) Lion Nathan has provided, and is responsible for, the provided that such access does not place an unreasonable Lion Nathan Information in the Scheme Booklet, and that burden on the ability of Lion Nathan to run its business.
nathan Kirin and its directors and officers (including the Kirin (c) continue to provide Kirin with all financial, commercial and Nominee Directors) do not assume any responsibility for the
lion risk information, documents, records and reports consistent accuracy or completeness of that Lion Nathan Information; with its normal practice over the 12 month period prior to the (b) Kirin has provided, and is responsible for, the Kirin Information 38 date of this agreement, including but not limited to, in the Scheme Booklet, and that Lion Nathan and its directors Lion Nathan interim and quarterly reports, information and officers do not assume any responsibility for the provided to Lion Nathan’s Finance and Risk Committee and accuracy or completeness of that Kirin Information except other information required by Kirin for it to comply with to the extent that Lion Nathan has provided Kirin with Japanese accounting standards and rules. information for the purpose of Kirin preparing information on 5.5 Lion Nathan Achievement Rights the merged entity following implementation of the Scheme; and The parties must discuss in good faith and co-operate with each other to ensure that all outstanding Lion Nathan Achievement (c) the Independent Expert has provided and is responsible for Rights are either acquired by Kirin, or otherwise dealt with to the Independent Expert’s Report and: Kirin’s satisfaction, before the Scheme Record Date. (i) Kirin and its directors and officers do not assume any The parties acknowledge and agree that they will work together responsibility for the accuracy or completeness of the in good faith so that as a consequence of the Transaction Independent Expert’s Report; and participants in the Lion Nathan Achievement Rights Plan will (ii) Lion Nathan and its directors and officers do not receive an aggregate sum equal to the sum of the Kirin Payment assume any responsibility for the accuracy or and the Special Payment for each Lion Nathan Achievement completeness of the Independent Expert’s Report. Right granted to the relevant participants prior to the Scheme Record Date that has not lapsed. 6. Scheme Booklet
5.6 Third party approvals and consents 6.1 Preparation
The parties agree to use their best endeavours and to work in Without limiting clauses 5.2 or 5.3: good faith and in a timely and cooperative fashion to ensure that (a) (preparation): Lion Nathan is generally responsible for the all Authorisations and consents from third parties which Kirin preparation of the Scheme Booklet but will provide drafts to reasonably considers necessary or desirable to implement the and consult with Kirin in accordance with clause 6.2; Transaction or any material part of the Transaction, or to facilitate Kirin carrying on the business of Lion Nathan following (b) (compliance - Lion Nathan) Lion Nathan must take all implementation of the Scheme, are obtained prior to the necessary steps to endeavour to ensure that the Implementation Date of the Scheme. Lion Nathan Information included in the Scheme Booklet:
(i) complies with the requirements of: LION NATHAN SCHEME BOOKLET 2009
(A) the Corporations Act; (i) promptly provide to Kirin, and include in a revised draft of the Scheme Booklet, any new information not (B) the Corporations Regulations; included in the Regulator’s Draft which is required by the (C) ASIC Regulatory Guide 60; Corporations Act, the Corporations Regulations, ASIC Regulatory Guide 60 or 142 or the Listing Rules to be (D) ASIC Regulatory Guide 142; and included in the Scheme Booklet; and (E) the Listing Rules; and (ii) keep Kirin informed of any matters raised by ASIC in (ii) is not, having regard to applicable disclosure relation to the Scheme Booklet and use all reasonable requirements, misleading or deceptive in any material endeavours, in co-operation with Kirin, to resolve any respect (including because of any material omission); such matters; and
(c) for the avoidance of doubt, the Kirin Nominee Directors have (e) (Kirin Information) obtain approval from Kirin for the form no obligations in relation to the preparation of the Scheme and context in which the Kirin Information appears in the Booklet or the Lion Nathan Information; Scheme Booklet which approval must not be unreasonably delayed or withheld. (d) (compliance - Kirin) Kirin must take all necessary steps to endeavour to ensure that the Kirin Information included in 6.3 Kirin information the Scheme Booklet: Without limiting clause 5.3, Kirin: (i) complies with the requirements of: (a) consents to the inclusion of the Kirin Information in the (A) the Corporations Act; Scheme Booklet; and
(B) the Corporations Regulations; (b) acknowledges that:
(C) ASIC Regulatory Guide 60; (i) it is responsible only for ensuring that the Kirin Information is not misleading or deceptive in any (D) ASIC Regulatory Guide 142; and material respect (whether by omission or otherwise) (E) the Listing Rules; and and that Lion Nathan will not verify or edit the final form of that information in the Scheme Booklet; and (ii) is not, having regard to applicable disclosure requirements, misleading or deceptive in any material (ii) the Scheme Booklet will state that Kirin is responsible respect (including because of any material omission). for the Kirin Information, in accordance with clause 5.9. limite d 2009 6.2 Consultation on Scheme Booklet 6.4 Disagreement on content
Without limiting clause 5.2, Lion Nathan must: If Kirin and Lion Nathan disagree on the form or content of the Scheme Booklet, they must consult in good faith to try to settle nathan (a) (consult Kirin): an agreed form of the Scheme Booklet. If complete agreement is lion (i) as soon as reasonably practicable after the date of this not reached after reasonable consultation, then: agreement, provide to Kirin an initial draft of the Scheme 39 (a) if the disagreement relates to the form or content of the Kirin Booklet for the purpose of enabling Kirin to review and Information contained in the Scheme Booklet, Lion Nathan comment on that draft document; will make such amendments as Kirin reasonably requires; (ii) provide to Kirin amended drafts of the Scheme Booklet and as reasonably agreed for the purpose of enabling Kirin (b) if the disagreement relates to the form or content of any to review and comment on those draft documents; other part of the Scheme Booklet, the Lion Nathan Board (iii) take the comments made by Kirin into account in good (other than the Kirin Nominee Directors) will, acting in good faith when producing revised drafts of the Scheme faith, decide the final form or content of the disputed part of Booklet; and the Scheme Booklet.
(iv) provide to Kirin a revised penultimate draft of the 6.5 Verification Scheme Booklet within a reasonable time before the Each party must undertake appropriate verification processes Regulator’s Draft is finalised and to enable Kirin to for the information supplied by that party for the Scheme review the Regulator’s Draft at least 5 Business Days Booklet and must provide each other with full and free access before its submission; to, and on request (acting reasonably), copies of all materials (b) (amend Scheme Booklet) implement such changes to those and documents used or created in connection with their parts of the Scheme Booklet relating to Kirin which are respective verification processes, and must maintain those provided in accordance with clause 6.2(a) as reasonably materials and documents for at least 7 years from the date of requested by Kirin and prior to finalising the Regulator’s this document for that purpose. Draft; 7. Conduct of business (c) (approval of Regulators Draft) as soon as reasonably 7.1 Overview practicable after finalisation of an advanced draft of the Regulator’s Draft suitable for review by ASIC, procure that From the date of this agreement up to and including the a meeting of the Lion Nathan Directors (other than the Kirin Implementation Date, Lion Nathan must conduct its business Nominee Directors) is convened to consider approving the in the ordinary and proper course consistent with business Regulator’s Draft as being in a form appropriate for provision plans and budgets approved by the Lion Nathan Board from to ASIC for review; time to time and must regularly consult with Kirin on the manner of conduct of the business. (d) (Regulatory Review Period) during the Regulatory Review Period: lion nathan SCHEME BOOKLET 2009
General terms continued
7.2 Prohibited actions 8.4 Kirin’s representations and warranties
Other than with the prior approval of Kirin or as required by this Kirin represents and warrants to Lion Nathan (on its own agreement Lion Nathan must not, during the period referred to in behalf and separately as trustee or nominee for each of the clause 7.1: Lion Nathan Directors) that each of the statements set out in schedule 6 is true and correct in all material respects as at (a) (Prescribed Event) take any action which would be the date of this agreement and as at 8.00am on the Second reasonably expected to give rise to a Prescribed Event; or Court Date. (b) (agreement) agree to do anything which would be 8.5 Kirin’s indemnity reasonably expected to give rise to a Prescribed Event. Kirin indemnifies the Lion Nathan Indemnified Parties against all 7.3 Deeds of access, indemnity and insurance Losses incurred directly or indirectly as a result of any of the (a) From the Implementation Date, Kirin must procure that representations and warranties in clause 8.4 not being true Lion Nathan and each member of the Lion Nathan Group and correct. preserve the indemnities and other rights under the deeds of 8.6 Kirin warranty certificate indemnity access and insurance made by them in favour of their respective directors and officers from time to time and, Kirin must provide to Lion Nathan by 8.00am on the Second in particular, must not take any action which would prejudice Court Date a certificate signed by a director of Kirin and made or adversely affect any directors’ and officers run-off in accordance with a resolution of the Kirin Board stating, as at insurance cover taken out prior to the Implementation Date. that date, that the representations and warranties given by Kirin in clause 8.4 remain true and accurate or, if any such (b) The undertakings contained in this clause 7.3 are subject representation or warranty is not true and accurate as at that to any restriction under the Corporations Act or any other date, providing complete particulars of the facts and matters applicable legislation and will be read down accordingly. which make the representation or warranty untrue or Lion Nathan receives and holds the benefit of this clause 7.3, inaccurate. to the extent it relates to the directors and officers of Lion Nathan and other members of the Lion Nathan Group, 8.7 Matters disclosed as trustee for them. Each of the representations or warranties given by Lion Nathan 7.4 Appointment of Incoming Directors in clause 8.1 is to be read down and qualified by any information which is within the actual knowledge of Kirin (including limite d 2009 As soon as practicable after the Second Court Date, Lion Nathan information within the actual knowledge of the Kirin Nominee must use its reasonable endeavours to cause the appointment Directors, obtained in their capacity as Lion Nathan Directors). of each Incoming Director to the Lion Nathan Board.
nathan 9. Court proceedings 7.5 Resignation of Lion Nathan Directors 9.1 Appeal process
lion As soon as practicable after the Second Court Date, Lion Nathan must use its reasonable endeavours to cause the resignation of If the Court refuses to make orders convening the Members’ 40 each Resigning Director from the Lion Nathan Board. Scheme Meeting or approving the Scheme, Kirin and Lion Nathan must appeal the Court’s decision to the fullest extent possible 8. Representations and warranties except to the extent that: 8.1 Lion Nathan’s representations and warranties (a) the parties agree otherwise; or Subject to clause 8.7, Lion Nathan represents and warrants to (b) Queen’s Counsel or Senior Counsel representing that party Kirin (on its own behalf and separately as trustee or nominee in relation to the Scheme indicates that, in their opinion, an for each of the Kirin Directors) that each of the statements set appeal would likely have less than a 50% prospect of out in schedule 5 is true and correct in all material respects as success, at the date of this agreement and as at 8.00am on the Second Court Date. in which case either party may terminate this agreement in accordance with clause 10.1(e)(iii). 8.2 Lion Nathan’s indemnity 9.2 Defence of proceedings Lion Nathan indemnifies the Kirin Indemnified Parties against all Losses incurred directly or indirectly as a result of any of the Each of Kirin and Lion Nathan must vigorously defend, or must representations and warranties in clause 8.1 not being true cause to be vigorously defended, any lawsuits or other legal and correct. proceeding brought against it (or any of its Subsidiaries) challenging this agreement or the completion of the Transaction. 8.3 Lion Nathan warranty certificate Neither Kirin nor Lion Nathan will settle or compromise (or permit Lion Nathan must provide to Kirin by 8.00am on the Second any of its Subsidiaries to settle or compromise) any claim Court Date a certificate signed by a director of Lion Nathan and brought in connection with this agreement without the prior made in accordance with a resolution of the Lion Nathan Board written consent of the other, such consent not to be stating, as at that date, that the representations or warranties unreasonably withheld. given by Lion Nathan in clause 8.1 remain true and accurate or, if 9.3 Costs any such representation or warranty is not true and accurate as at that date, providing complete particulars of the facts and Any costs incurred as a result of the operation of this clause 9 matters which make the representation or warranty untrue will be borne equally by each party. or inaccurate. LION NATHAN SCHEME BOOKLET 2009
10. Termination damages for Losses suffered by it and expenses incurred by it as a result of the breach of the terms of this agreement. 10.1 Termination events 11. Standstill Without limiting any other provision of this agreement (including clauses 3.9 and 9.1), this agreement may be terminated: During the Standstill Period Kirin must not, and must procure that none of its directors or Related Bodies Corporate: (a) (End Date) by either party, if the Scheme has not become Effective by the End Date; or (a) acquire, agree to acquire or make any offer to acquire a Relevant Interest or other economic interest in the shares (b) (lack of support or breach) at any time prior to 8.00am on of the other party or (other than in the ordinary course of the Second Court Date: business) any assets of the other party or any Related Body (i) by Kirin if the Lion Nathan Board (other than the Kirin Corporate of the other party; or Nominee Directors) changes its recommendation to the (b) advise, assist or encourage any other person to do any of Scheme Participants that they vote in favour of the the things referred to in sub-clause (a), resolution to approve the Scheme, including any adverse modification to its recommendation, or otherwise makes unless such action is taken with the prior written consent of a public statement indicating that it no longer supports Lion Nathan. the Scheme; or For the avoidance of doubt, this clause does not apply to any (ii) by either Kirin or Lion Nathan if the other is in material action taken or required to be taken by Kirin, Related Bodies breach of any clause of this agreement (excluding a Corporate of Kirin or directors of Kirin under the Scheme. representation or warranty set out in schedule 5 or 12. Public announcements schedule 6), taken in the context of the Transaction as a whole, provided that either Kirin or Lion Nathan, 12.1 Required disclosure as the case may be, has, if practicable, given notice to Where a party is required by law, the Listing Rules or a the other setting out the relevant circumstances and memorandum of understanding with a Regulatory Authority to stating an intention to terminate and, the relevant make any announcement or make any disclosure relating to a circumstances continue to exist 5 Business Days (or matter the subject of the Transaction, it may do so only after it any shorter period ending at 8:00am on the Second has given the other party as much notice as possible and has Court Date) after the time such notice is given; or consulted to the fullest extent possible in the circumstances with
(c) (not approved) by either party if the resolution submitted the other party and its legal advisers. limite d 2009 to the Members’ Scheme Meeting is not approved by the 12.2 Other announcements requisite majorities;
Subject to clause 12.1, no party may make any public nathan (d) (restraint) by either party if a Court or other Regulatory announcement in connection with the Transaction other than in Authority has issued a final and non‑appealable order, a form approved by each party (acting reasonably). Each party lion decree or ruling or taken other action which permanently will use all reasonable endeavours to provide such approval as restrains or prohibits the Scheme; 41 soon as practicable. (e) (consultation or appeal failure) in accordance with and 13. Confidential Information pursuant to: Each party acknowledges and agrees that it continues to be (i) clause 3.9(a); bound by the Confidentiality Deed (for so long as that document (ii) clause 3.9(b); or remains in force) in respect of all information received by it from the other party on, before or after the date of this agreement. (iii) clause 9.1; 14. Notices and other communications (f) (agreement) if agreed to in writing by Kirin and Lion Nathan. 14.1 Form - all communications 10.2 Termination Unless expressly stated otherwise in this agreement, all notices, Where a party has a right to terminate this agreement, that right certificates, consents, approvals, waivers and other for all purposes will be validly exercised if the party delivers a communications in connection with this agreement must be: notice in writing to the other party stating that it terminates this agreement. (a) in writing;
10.3 Effect of Termination (b) in English or accompanied by a certified translation into English; In the event that a party terminates this agreement, or if this agreement otherwise terminates in accordance with its terms, (c) signed by the sender (if an individual) or an Authorised then in either case all further obligations of the parties under this Officer of the sender; and agreement, other than the obligations set out in clauses 9.1, 11, (d) marked for the attention of the person identified in the 13, 14, 15 and 16 will immediately cease to be of further force Details or, if the recipient has notified otherwise, then and effect without further liability of any party to the other, marked for attention in the way last notified. provided that nothing in this clause releases any party from liability for any pre-termination breach of this agreement. 14.2 Form - communications sent by email
10.4 Damages Communications sent by email need not be marked for attention in the way stated in clause 14.1. However, the email must state In addition to the right of termination under clause 10.1 where the first and last name of the sender. there is no appropriate remedy for the breach in the agreement (other than termination), the non-defaulting party is entitled to lion nathan SCHEME BOOKLET 2009
General terms continued
Communications sent by email are taken to be signed by the (b) if an adjustment event arises in respect of the supply, the named sender. additional amount will be adjusted to reflect the adjustment event and the recipient or the supplier (as the case may be) 14.3 Delivery must make any payments necessary to reflect the Communications must be: adjustment.
(a) left at the address set out or referred to in the Details; 15.3 Reimbursements
(b) sent by prepaid ordinary post (airmail if appropriate) to the If a party is required under this agreement to indemnify another address set out or referred to in the Details; party or pay or reimburse costs of another party, that party agrees to pay: (c) sent by fax to the fax number set out or referred to in the Details; (a) the relevant amount less any input tax credits to which the other party (or to which the representative member for a (d) sent by email to the address set out or referred to in the GST group of which the other party is a member) is entitled; Details; or and (e) given in any other way permitted by law. (b) if the indemnity or payment or reimbursement is subject However, if the intended recipient has notified a changed to GST, an amount equal to that GST, in accordance with address, fax number or email address, then communications clause 15.2. must be to that address, fax number or email address. 15.4 Interpretation 14.4 When effective All expressions used in this clause 15 which are defined in the Communications take effect from the time they are received or GST Law have the meanings given to them in the GST Law. GST taken to be received under clause 14.5 (whichever happens first) Law has the same meaning it has in the A New Tax System unless a later time is specified. (Goods and Services Tax) Act 1999 (Cwlth).
14.5 When taken to be received 15.5 Survival
Communications are taken to be received: This clause will survive termination of this agreement.
(a) if sent by post, three days after posting (or seven days after 16. Miscellaneous posting if sent from one country to another); limite d 2009 16.1 Discretion in exercising rights (b) if sent by fax, at the time shown in the transmission report A party may exercise a right or remedy or give or refuse its as the time that the whole fax was sent; or consent in any way it considers appropriate (including by nathan (c) if sent by email: imposing conditions), unless this agreement expressly states otherwise.
lion (i) when the sender receives an automated message confirming delivery; or 16.2 Partial exercising of rights 42 (ii) four hours after the time sent (as recorded on the If a party does not exercise a right or remedy fully or at a given device from which the sender sent the email) unless the time, the party may still exercise it later. sender receives an automated message that the email 16.3 No liability for loss has not been delivered, A party is not liable for loss caused by the exercise or attempted whichever happens first. exercise of, failure to exercise, or delay in exercising a right or 14.6 Receipt outside business hours remedy under this agreement.
Despite clauses 14.4 and 14.5, if communications are received or 16.4 Approvals and consents taken to be received under clause 14.5 after 5.00pm in the place By giving its approval or consent a party does not make or give of receipt or on a non-Business Day, they are taken to be any warranty or representation as to any circumstance relating received at 9.00am on the next Business Day and take effect to the subject matter of the consent or approval. from that time unless a later time is specified. 16.5 Conflict of interest 15. Goods and services tax (GST) The parties’ rights and remedies under this agreement may be 15.1 Consideration does not include GST exercised even if it involves a conflict of duty or a party has a The consideration specified in this agreement does not include personal interest in their exercise. any amount for GST. 16.6 Remedies cumulative 15.2 Recovery of GST The rights and remedies in this agreement are in addition to If GST is payable on any supply made under this agreement, for other rights and remedies given by law independently of this which the consideration is not expressly stated to include GST, agreement. the recipient agrees to pay to the supplier an additional amount 16.7 Variation and waiver equal to the GST at the same time that the consideration for the supply is to be provided. However: A provision of this agreement or a right created under it, may not be waived or varied except in writing, signed by the party or (a) the recipient need not pay the additional amount until the parties to be bound. supplier gives the recipient a tax invoice or an adjustment note; and LION NATHAN SCHEME BOOKLET 2009
16.8 No merger Kirin agrees to pay all of Lion Nathan’s reasonable third party costs in complying with these requests. The warranties, undertakings and indemnities in this agreement do not merge on the Implementation Date. 16.15 Disclosure
16.9 Indemnities Each party may disclose information relating to the Transaction to a Tax Authority for the purpose of obtaining any Tax relief, The indemnities in this agreement are continuing obligations, pre-determinations, exemptions, approvals or rulings from a independent from the other obligations of the parties under this Tax Authority. agreement and continue after this agreement ends. It is not necessary for a party to incur expense or make payment before 16.16 Entire agreement enforcing a right of indemnity under this agreement. Except for the Confidentiality Deed, this agreement constitutes 16.10 Enforceability the entire agreement of the parties about its subject matter and supersedes all previous agreements, understandings and For the purpose of this agreement: negotiations on that subject matter. (a) Lion Nathan is taken to be acting as agent and trustee on 16.17 Assignment behalf of and for the benefit of all Lion Nathan Indemnified Parties; and A party may not assign or otherwise deal with its rights under this agreement or allow any interest in them to arise or be varied (b) Kirin is taken to be acting as agent and trustee on behalf of in each case, without the consent of the other party. and for the benefit of all Kirin Indemnified Parties, 16.18 No representation or reliance and all of those persons are to this extent taken to be parties to this agreement. Each party acknowledges that:
16.11 Further steps (a) no party (nor any person acting on its behalf) has made any representation or other inducement to it to enter into this Each party agrees, at its own expense, to do anything the other agreement, except for representations or inducements party reasonably requests (such as obtaining consents, signing expressly set out in this agreement; and producing documents and getting documents completed and signed): (b) it does not enter into this agreement in reliance on any representation or other inducement by or on behalf of any (a) to bind the party and any other person intended to be bound other party, except for any representation or inducement
under this agreement; or limite d 2009 expressly set out in this agreement; and (b) to show whether the party is complying with this agreement. (c) sub-clauses 16.18(a) and 16.18(b) above do not prejudice any
16.12 Construction rights a party may have in relation to information which had nathan been filed by the other party with any Regulatory Authority. No rule of construction applies to the disadvantage of a party lion because that party was responsible for the preparation of, or 16.19 Governing law seeks to rely on, this agreement or any part of it. 43 This agreement is governed by the law in force in the place 16.13 Costs specified in the Details. Each party submits to the non-exclusive jurisdiction of the courts of that place. The parties agree to pay their own legal and other costs and expenses in connection with the preparation, execution and 16.20 Counterparts completion of this agreement and other related documentation This agreement may be executed in counterparts. All except for stamp duty. counterparts when taken together are to be taken to constitute 16.14 Stamp duty one instrument.
(a) Kirin agrees to pay all stamp duty (including fines and penalties) payable and assessed by legislation or by any EXECUTED as an agreement revenue office on this agreement or the Scheme and in respect of a transaction contemplated by or related to this agreement or the Scheme.
(b) Before and after the Implementation Date, Lion Nathan must provide to Kirin in a timely manner any assistance and any information or record in the Lion Nathan Group’s possession or control which Kirin reasonably requests to:
(i) apply to any Tax Authority for any corporate reconstruction stamp duty relief, stamp duty rulings or stamp duty pre-determinations which Kirin determines are necessary or desirable in connection with the Transaction or any restructuring of Kirin or its Related Bodies Corporate in connection with the Transaction; or
(ii) satisfy the requirements of any Tax Authority for assessment of any duty referred to in clause 16.14(a) (for example, information for identifying and valuing land and other property held by the Lion Nathan Group in particular States and Territories of Australia). lion nathan SCHEME BOOKLET 2009
Schedule 1 – Conditions Precedent (clause 3.1)
Party entitled Party Condition to benefit responsible
1. Regulatory Approvals Before 8.00am on the Second Court Date:
(a) (ASIC and ASX) ASIC and ASX have issued or provided (and not withdrawn, Both Both revoked or varied) such consents, waivers, modifications, and/or approvals or have done such other acts which are necessary or the parties agree are reasonably desirable to implement the Scheme. If such consents, waivers, modifications, and/ or approvals are subject to conditions those conditions must be acceptable to Kirin and Lion Nathan. (b) (FIRB approval) prior to the Second Court Date, either: Cannot be waived Kirin
(i) the Treasurer (or his delegate) has provided written advice that there are no objections under Australia’s foreign investment policy to the proposed Transaction and that advice is unconditional or subject to conditions that are acceptable to Kirin; or
(ii) following notice of the proposed Transaction having been given by Kirin to the Treasurer under the Foreign Acquisitions and Takeovers Act 1975 (Cwlth), the Treasurer has ceased to be empowered to make any order under Part II of that Act because of lapse of time. (c) (OIO consent) consent is given to and received by Kirin under the Overseas Cannot be waived Kirin Investment Act 2005 (NZ) and the Overseas Investment Regulations 2005 (NZ) to the Transaction, and such consent is not withdrawn. (d) (ACCC) ACCC Approval is received. Both Both (e) (NZCC) NZCC Approval is received. Both Both (f) (Regulatory Authority) all other approvals of a Regulatory Authority (other than any Both Both limite d 2009 ruling issued by a Tax Authority) which Kirin and Lion Nathan agree, acting reasonably, are necessary to implement any material aspect of the Transaction are obtained, on an unconditional basis or subject to conditions that are acceptable to Kirin. nathan (g) (Court orders) no Court or Regulatory Authority has issued or taken steps to issue Both Both
lion an order, temporary restraining order, preliminary or permanent injunction, decree or ruling or taken any action enjoining, restraining or otherwise imposing a legal 44 restraint or prohibition preventing the implementation of any material aspect of the Transaction and no such order, decree, ruling, other action or refusal is in effect. 2. Scheme approvals Cannot be waived Lion Nathan
(Scheme) Scheme Participants approve the Scheme by the requisite majorities in accordance with the Corporations Act.
3. Court approvals Cannot be waived Lion Nathan
The Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act.
4. Lion Nathan matters Kirin Lion Nathan
(a) (Lion Nathan’s representations and warranties) Lion Nathan’s representations and warranties as set out in schedule 5 are true and correct, in all Material respects, in each case as at the date of this agreement and as at 8.00am on the Second Court Date. (b) (No Material Adverse Event) no Material Adverse Event occurs between the date Kirin Lion Nathan of this agreement and 8.00am on the Second Court Date.
5. Kirin events Lion Nathan Kirin
(Kirin’s representations and warranties) Kirin’s representations and warranties as set out in schedule 6 are true and correct, in all material respects, in each case as at the date of this agreement and as at 8.00am on the Second Court Date.
6. No termination Both Both
This agreement has not been terminated in accordance with clause 10.
7. Independent Expert Report Lion Nathan Lion Nathan
The Independent Expert issues a report which concludes that the Scheme is in the best interest of Scheme Participants before the date on which the Scheme Booklet is lodged with ASIC. LION NATHAN SCHEME BOOKLET 2009
Schedule 2 - Timetable (clause 5.1)
Dates are indicative only
Event Date
Lodge Scheme Booklet with ASIC July / August 2009
Application in respect of the Court hearing to be held on the First Court Date, July / August 2009 filed with the Court, served on ASIC and delivered to ASX
First Court Date August / September 2009
Printing of Scheme Booklet August / September 2009
Despatch of Scheme Booklet August / September 2009
Members’ Scheme Meeting held September / October 2009
Second Court Date October 2009
Lodge Court order with ASIC (Effective Date) October 2009
Scheme Record Date October 2009
Implementation Date October 2009 limite d 2009 nathan lion
45 lion nathan SCHEME BOOKLET 2009
Schedule 3 - Lion Nathan’s Obligations (clause 5.2)
1. (Lion Nathan Information) ensure that the Lion Nathan 9. (Registration of explanatory statement) request ASIC to Information included in the Scheme Booklet complies with register the explanatory statement included in the Scheme the Corporations Act, the Corporations Regulations, the Booklet in relation to the Scheme in accordance with Listing Rules and ASIC Regulatory Guides 60 and 142. section 412(6) of the Corporations Act.
2. (Further Lion Nathan Information) provide to Kirin and 10. (Send Scheme Booklet) send the Scheme Booklet to Scheme Participants such further or new Lion Nathan Scheme Participants as soon as practicable after the Information as may arise after the Scheme Booklet has been Court orders Lion Nathan to convene the Members’ sent until the date of the Members’ Scheme Meeting as may Scheme Meeting. be necessary to ensure that the Lion Nathan Information 11. (Members’ Scheme Meeting) convene the Members’ contained in the Scheme Booklet is not, having regard to Scheme Meeting in accordance with any such orders made applicable disclosure requirements, false, misleading or by the Court and seek the approval of Scheme Participants deceptive in any material respect (including because of any for the Scheme and, for this purpose, the directors of material omission). Lion Nathan must participate in reasonable efforts to 3. (Independent Expert) promptly appoint the Independent promote the merits of the Scheme, including meeting with Expert and provide any assistance and information key Scheme Participants at the reasonable request of Kirin. reasonably requested by the Independent Expert to enable 12. (Court order) apply to the Court for an order approving the it to prepare the Independent Expert’s Report for the Scheme in accordance with sections 411(4)(b) and 411(6) of Scheme Booklet. the Corporations Act. 4. (Provide a copy of the Independent Expert’s Report) 13. (Certificate) provide the Court on the Second Court Date on receipt, provide Kirin with a copy of the final draft with a certificate confirming (in respect of matters within its Independent Expert’s Report received from the knowledge) whether all the conditions precedent as set out Independent Expert for review for factual accuracy. in schedule 1 (other than the condition relating to Court 5. (Directors’ recommendation) state in the Scheme Booklet approval of the Scheme - item 3) have been satisfied or and the public announcement issued after execution of this waived in accordance with the terms of this agreement. agreement (on the basis of statements made to Lion Nathan 14. (Lodge) lodge with ASIC an office copy of any such Court by each member of the Lion Nathan Board (other than the order approving the Scheme as approved by the Scheme Kirin Nominee Directors)) that each of the directors of the Participants at the Members’ Scheme Meeting in accordance limite d 2009 Lion Nathan Board (other than the Kirin Nominee Directors) with section 411(10) of the Corporations Act. recommends to Scheme Participants that the Scheme be approved in the absence of a Superior Proposal and subject 15. (Lion Nathan Register information) close the Lion Nathan
nathan to the Independent Expert expressing an opinion that the Register as at 5.00pm on the Scheme Record Date. Scheme is in the best interest of the Scheme Participants. 16. (Registration) register all transfers of Scheme Shares to lion 6. (Directors’ voting) use its reasonable endeavours to Kirin on the Implementation Date. 46 procure that: 17. (Listing) take all reasonable steps to maintain Lion Nathan’s (a) each member of the Lion Nathan Board (other than the listing on ASX and NZX, notwithstanding any suspension of Kirin Nominee Directors) votes any Scheme Shares in the quotation of Lion Nathan Shares, up to and including the which they have a Relevant Interest in favour of the Implementation Date, including making appropriate Scheme and any other resolution submitted to Scheme applications to ASX, ASIC and NZX. Participants for their approval in connection with the 18. (Compliance with laws) use its reasonable endeavours to Scheme; and do everything reasonably within its power to ensure that (b) each member of the Lion Nathan Board (other than the the Scheme are effected in accordance with all laws and Kirin Nominee Directors) does not change that voting regulations applicable in relation to the Scheme. intention, 19. (Incentive plans) subject to Court approval of the Scheme, unless the Directors recommendation is withdrawn but with effect from the Implementation Date or such later or modified. date agreed by the parties acting reasonably, terminate all of its executive and employee incentive plans that will or 7. (Section 411(17)(b) statement) apply to ASIC for the could result in securities in Lion Nathan being issued to production of a statement pursuant to section 411(17)(b) of Lion Nathan Group Directors or employees. the Corporations Act stating that ASIC has no objection to the Scheme. 20. (Achievement Rights) ensure that no Lion Nathan Achievement Rights are issued or granted after the Scheme 8. (Court application and representation) apply to the Court Record Date. for an order under section 411(1) of the Corporations Act directing Lion Nathan to convene the Members’ Scheme 21. (Other steps) do all other things necessary to give effect Meeting and engage suitable senior counsel to represent to the Scheme and the orders of the Court approving Lion Nathan in all Court proceedings related to the the Scheme. Scheme and consult with Kirin in relation to the content of the document required for the purpose of the Scheme (including originating process, affidavits, submissions and draft minutes of Court orders) and take into account all reasonable comments provided for and on behalf of Kirin in relation to such documents. LION NATHAN SCHEME BOOKLET 2009
Schedule 4 - Kirin’s Obligations (clause 5.3)
1. (Committed Funding) secure the Kirin Funding Commitment 6. (Representation) procure that it is represented by counsel by 8.00am on the Second Court Date, or any earlier time at the court hearings convened for the purposes of section required by the Court or ASIC. 411(4)(b) of the Corporations Act, at which, through it’s counsel Kirin must undertake (if requested by the court) to 2. (Funding requirements from Court or ASIC) do everything do all such things and take all such steps within its power as required by ASIC or the Court in relation to confirming may be necessary in order to ensure the fulfilment of its funding for the proposed acquisition of the Scheme Shares obligations under this agreement and the Scheme. under the Scheme. 7. (Certificate) provide the Court on the Second Court Date 3. (Kirin Information) provide to Lion Nathan for inclusion in with a certificate confirming (in respect of matters within its the Scheme Booklet such Kirin Information as Lion Nathan knowledge) whether all the conditions precedent as set out reasonably requires to prepare and issue the Scheme in schedule 1 (other than the condition relating to Court Booklet (including any information required under the approval of the Scheme - item 3) have been satisfied or Corporations Act, the Corporations Regulations, the Listing waived in accordance with the terms of this agreement. Rules or ASIC Regulatory Guide 60 or 142). 8. (Kirin Deed Poll) prior to the Scheme Booklet being sent to 4. (Further Kirin Information) provide to Lion Nathan such Scheme Participants, sign and deliver the Kirin Deed Poll. further or new Kirin Information as may arise after the Scheme Booklet has been sent until the date of the 9. (Other steps) do all other things necessary to give effect Members’ Scheme Meeting as may be necessary to ensure to the Scheme and the orders of the Court approving that the Kirin Information contained in the Scheme Booklet is the Scheme. not, having regard to applicable disclosure requirements, false, misleading or deceptive in any material respect (including because of any material omission).
5. (Independent Expert information) provide any assistance or information reasonably requested by the Independent Expert in connection with the preparation of the Independent Expert’s Report to be included in the Scheme Booklet. limite d 2009 nathan lion
47 lion nathan SCHEME BOOKLET 2009
Schedule 5 - Lion Nathan’s representations and warranties (clause 8.1)
1. (Incorporation) it is a valid existing corporation registered (a) 534,240,495 ordinary shares quoted on ASX; and under the laws of its place of incorporation. (b) 1,538,351 Lion Nathan Achievement Rights not quoted 2. (Execution) the execution and delivery of this agreement has on ASX, been properly authorised by all necessary corporate action and the Lion Nathan Group has not issued, or agreed to of Lion Nathan. issue, any other securities or instruments which are still in 3. (Corporate power) it has full corporate power and lawful force and may convert into Lion Nathan Shares or any other authority to execute and deliver this agreement and to securities in Lion Nathan other than: consummate and perform or cause to be performed (c) Lion Nathan Achievement Rights issued pursuant to or its obligations under this agreement in accordance with consistent with arrangements entered into before the date its terms. of this agreement (including invitations or offers made, and 4. (Binding obligations) (subject to laws generally affecting terms of participation, under the Lion Nathan Achievement creditors’ rights and the principles of equity) this agreement Rights Plan); and constitutes legal, valid and binding obligations on it. (d) Lion Nathan Shares to be issued on the exercise of: 5. (Lion Nathan Information) the Lion Nathan Information (i) Lion Nathan Achievement Rights; or provided in accordance with this agreement and included in the Scheme Booklet, as at the date of the Scheme (ii) Lion Nathan Achievement Rights to be issued pursuant Booklet, will not contain any material statement which is to arrangements referred to in paragraph (c). misleading or deceptive nor contain any material omission having regard to applicable disclosure requirements and will comply in all material respects with the requirements of the Corporations Act, the Corporations Regulations, the Listing Rules and ASIC Regulatory Guides 60 and 142.
6. (Further information) Lion Nathan will, as a continuing obligation, provide to Kirin all such further or new information which may arise after the date of the Scheme Booklet until the date of the Members’ Scheme Meeting which may be necessary to ensure that there would be limite d 2009 no breach of clause 5 of this schedule if it applied as at the date upon which that information arose.
nathan 7. (Periodic disclosure) the periodic financial disclosures made by Lion Nathan in its annual financial report and
lion half-yearly financial report were not misleading or deceptive when made and are prepared in accordance with the 48 Corporations Act and with all relevant Accounting Standards and give a true and fair view of the financial position and performance of the Lion Nathan Group as at the date they were made.
8. (Continuous disclosure) Lion Nathan is not in breach of its continuous disclosure obligations under the Corporations Act and the Listing Rules.
9. (Information) to the best of the knowledge of the Lion Nathan executives who provided the Management Responses as at the date of this agreement, all the Due Diligence Materials and Management Responses were prepared in good faith with due care, skill and diligence and are true and accurate in all material respects when considered in aggregate, as at the date of this agreement.
10. (Compliance) as at the date of this agreement and to the best of the knowledge of the Lion Nathan executives who provided the Management Responses, Lion Nathan and its Subsidiaries have complied in all material respects with all laws applicable to them and orders of Australian and foreign governmental agencies having jurisdiction over them and have all material licenses, permits and franchises necessary for them to conduct their respective businesses as presently being conducted.
11. (Insolvency) no member of the Lion Nathan Group is Insolvent (other than a member of the Lion Nathan Group currently in liquidation).
12. (Securities) Lion Nathan’s issued securities as at the date of this agreement are: LION NATHAN SCHEME BOOKLET 2009
Schedule 6 - Kirin’s representations and warranties (clause 8.4)
1. (Incorporation) it is a valid existing corporation registered under the laws of its place of incorporation.
2. (Execution) the execution and delivery of this agreement has been properly authorised by all necessary corporate action of Kirin.
3. (Corporate power) it has full corporate power and lawful authority to execute and deliver this agreement and to consummate and perform or cause to be performed its obligations under this agreement in accordance with its terms.
4. (Binding obligations) (subject to laws generally affecting creditors’ rights and the principles of equity) this agreement constitutes legal, valid and binding obligations on it.
5. (Kirin Information) the Kirin Information provided in accordance with this agreement and included in the Scheme Booklet, as at the date of the Scheme Booklet, will not contain any material statement which is misleading or deceptive nor contain any material omission having regard to applicable disclosure requirements and will comply in all material respects with the requirements of the Corporations Act, the Corporations Regulations, the Listing Rules and ASIC Regulatory Guide 60 and 142.
6. (Further information) Kirin will, as a continuing obligation, provide to Lion Nathan all such further or new information which may arise after the date of the Scheme Booklet until the date of the Members’ Scheme Meeting which may be necessary to ensure that there would be no
breach of clause 6 if it applied as at the date on which limite d 2009 that information arose. nathan lion
49 lion nathan SCHEME BOOKLET 2009
Signing page
DATED 10 MAY 2009
SIGNED on behalf of KIRIN HOLDINGS COMPANY, LIMITED, a corporation incorporated in Japan, by (a person who, in accordance with the laws of that place is authorised to sign this document for that corporation) and sealed and delivered as a deed by that corporation in the presence of:
Signature of witness Signature of authorised signatory
Name of witness Name of authorised signatory
EXECUTED by LION NATHAN LIMITED in accordance with section 127(1) of the Corporations Act 2001 (Cwlth) by authority of its directors:
Signature of director Signature of director/company secretary* *delete whichever is not applicable
limite d 2009 Name of director (block letters) Name of director/company secretary* (block letters) *delete whichever is not applicable nathan lion
50 LION NATHAN SCHEME BOOKLET 2009
Annexure B - Scheme of Arrangement
Scheme of Arrangement
DATED 7 OCTOBER 2009
Lion Nathan Limited (ACN 093 160 448) (“Lion Nathan”)
Scheme Participants
contents
Details 49 5 Implementation of Scheme 52 General terms 50 6 Provision of Scheme Consideration 52 1 Definitions and interpretation 50 7 Dealings in Lion Nathan Shares 53 2 Preliminary 51 8 General provisions 53 3 Conditions precedent 51 9 Governing law and jurisdiction 54 4 Scheme 52
details
Parties Lion Nathan and Scheme Participants
Lion Nathan Name Lion Nathan Limited limite d 2009 ACN 093 160 448
Address Level 7, 68 York Street
Sydney, NSW, 2000, Australia nathan
Telephone 61-2-9320-2200 lion
Fax 61-2-9320-2264 51
Attention General Counsel and Company Secretary
Scheme Participants Name Lion Nathan Shareholders as at the Scheme Record Date, other than an Excluded Shareholder.
Governing law New South Wales lion nathan SCHEME BOOKLET 2009
general terms
1. Definitions and interpretation Lion Nathan Achievement Right means an Achievement Right as defined in the Lion Nathan Achievement Rights Plan or any 1.1 Definitions right awarded under the Share Scheme Section of the In this Scheme, unless the context requires otherwise: Lion Nathan Employee Benefit Plan (New Zealand), as amended from time to time. ASIC means the Australian Securities and Investments Commission. Lion Nathan Achievement Rights Plan means the Lion Nathan Achievement Rights Plan established by Lion Nathan, as ASX means ASX Limited (ABN 98 008 624 691), Australian amended from time to time. Securities Exchange or the Australian Stock Exchange as appropriate. Lion Nathan Board means the board of directors of Lion Nathan as constituted from time to time. Business Day means a business day as defined in the Listing Rules. Lion Nathan Register means the register of members of Lion Nathan maintained by or on behalf of Lion Nathan in CHESS means the clearing house electronic sub-register accordance with section 168(1) of the Corporations Act and system for the electronic transfer of securities operated by ASX Lion Nathan Registry has a corresponding meaning. Settlement and Transfer Corporation Pty Limited (ABN 49 008 504 532). Lion Nathan Share means an issued fully paid ordinary share in the capital of Lion Nathan. Corporations Act means the Corporations Act 2001 (Cwlth). Lion Nathan Shareholder means each person who is registered Court means the Federal Court of Australia (New South Wales in the Lion Nathan Register as a holder of Lion Nathan Shares. registry), or such other court of competent jurisdiction under the Corporations Act agreed in writing by Lion Nathan and Kirin. Listing Rules means the Listing Rules of the ASX.
Deed Poll means the deed poll executed by Kirin substantially in Nominee has the meaning given to that term in clause 2.3 of the form of Annexure B of the Implementation Agreement or as this Scheme. otherwise agreed by Kirin and Lion Nathan under which Kirin NZX means NZX Limited or the securities market which it covenants in favour of each Scheme Participant to perform its operates, as the context requires. obligations under this Scheme. Related Body Corporate has the meaning it has in the Details means the section of this agreement headed “Details”. Corporations Act. limite d 2009 Effective, when used in relation to this Scheme, means Scheme means this scheme of arrangement between the coming into effect, pursuant to section 411(10) of the Lion Nathan and Scheme Participants under which all the Corporations Act, of the order of the Court made under section
nathan Scheme Shares will be transferred to Kirin (or if applicable, the 411(4)(b) of the Corporations Act in relation to this Scheme, but Nominee) under Part 5.1 of the Corporations Act as described in in any event at no time before an office copy of the order of the lion clause 5, in consideration for the Scheme Consideration, subject Court is lodged with ASIC. to any alterations or conditions made or required by the Court 52 Effective Date in relation to this Scheme means the date on pursuant to section 411(6) of the Corporations Act to the extent which the Scheme becomes Effective. they are approved in writing by Lion Nathan and Kirin in accordance with clause 8.8 of this Scheme. End Date means 31 December 2009 or such other date as Kirin and Lion Nathan agree. Scheme Consideration means the amount of A$11.50 per Lion Nathan Share held by a Scheme Participant as at the Excluded Shareholder means any Lion Nathan Shareholder Scheme Record Date, less the Scheme Consideration who is Kirin or a Related Body Corporate of Kirin. Adjustment Amount (if any). FASTER means NZX’s Fully Automated Screen Trading and Scheme Consideration Adjustment Amount means the amount Electronic Registration system. of any dividends or distributions declared or announced by Immediately Available Funds means a bank cheque or other Lion Nathan prior to the Implementation Date, except for the form of cleared funds acceptable to Lion Nathan. Special Dividend or the Interim Dividend.
Implementation Agreement means the Implementation Scheme Meeting means the meeting of Lion Nathan Agreement between Kirin and Lion Nathan dated 10 May 2009 Shareholders (other than an Excluded Shareholder), ordered under which, amongst other things, Lion Nathan has agreed to by the Court to be convened pursuant to section 411(1) of the propose this Scheme to Lion Nathan Shareholders (other than Corporations Act to consider this Scheme. an Excluded Shareholder), and each of Kirin and Lion Nathan has Scheme Participant means each person who is a Lion Nathan agreed to take certain steps to give effect to this Scheme. Shareholder as at the Scheme Record Date, other than an Implementation Date means the fifth Business Day following Excluded Shareholder. the Scheme Record Date, or such other date as is agreed by Scheme Record Date means 7.00pm on the fifth Business Day Kirin and Lion Nathan. following the Effective Date or such other date (after the Interim Dividend means the interim dividend of A$0.22 per Effective Date) as Lion Nathan and Kirin agree. Lion Nathan Share, paid by Lion Nathan on 23 June 2009. Scheme Shares means all Lion Nathan Shares held by Scheme Kirin means Kirin Holdings Company, Limited, a company Participants as at the Scheme Record Date and for the incorporated in Japan, with its address at 10-1 Shinkawa avoidance of doubt includes any Lion Nathan Shares issued on 2-chome, Cho-ku, Tokyo, 104-8288, Japan. or before the Scheme Record Date including upon the exercise of any Lion Nathan Achievement Rights. Lion Nathan has the meaning given in the Details. LION NATHAN SCHEME BOOKLET 2009
Second Court Date means the day on which the Court makes 2. Preliminary an order pursuant to section 411(4)(b) of the Corporations Act 2.1 Lion Nathan approving the Scheme. Lion Nathan is: Share Scheme Transfer means, for each Scheme Participant, a duly completed and executed proper instrument of transfer of (a) a public company limited by shares incorporated in Australia; the Scheme Shares held by that Scheme Participant for the (b) registered in the state of New South Wales; and purposes of section 1071B of the Corporations Act, which may be a master transfer of all Scheme Shares. (c) admitted to the official list of ASX and NZX.
Special Dividend means the dividend of A$0.50 per Lion Nathan 2.2 Kirin Share that Lion Nathan will pay holders of Lion Nathan Shares in Kirin is a company incorporated in Japan. accordance with the Implementation Agreement. 2.3 Nominee Subsidiaries has the meaning it has in the Corporations Act. Pursuant to clause 2.4 of the Implementation Agreement, Kirin Trust Account means the trust account operated by may nominate a wholly owned Subsidiary of Kirin (“Nominee”) Lion Nathan to hold the aggregate Scheme Consideration on to pay the Scheme Consideration and to which the Scheme trust for the purpose of paying the Scheme Consideration to the Shares are to be transferred in accordance with clause 5 of Scheme Participants in accordance with clause 6.4. this Scheme. 1.2 Interpretation If Kirin nominates a Nominee, then clause 2.4(b) of the In this Scheme, unless the context requires otherwise: Implementation Agreement provides that Kirin must procure that the Nominee complies with the Implementation Agreement (a) a reference: as if the Nominee were a party to it in place of Kirin. (i) to the singular includes the plural and vice versa; 2.4 Deed Poll (ii) to a gender includes all genders; Kirin has entered into the Deed Poll for the purpose of (iii) to an agreement, document or instrument is a reference covenanting in favour of Scheme Participants to perform to that agreement, document or instrument as amended, (or procure the performance of) the obligations contemplated consolidated, supplemented, novated or replaced; of it (or if applicable, the Nominee) under this Scheme.
(iv) to a party means a party to this Scheme; 3. Conditions precedent limite d 2009
(v) to a clause, paragraph, Schedule or Annexure is to a 3.1 Conditions precedent to Scheme clause, paragraph, Schedule or Annexure of or to this
This Scheme is conditional on, and will have no force or nathan Scheme; effect until, the satisfaction of each of the following conditions
(vi) to a person (including a party) includes: precedent, and the provisions of this Scheme will not come lion into effect unless and until each of these conditions have been (A) an individual, company, other body corporate, 53 satisfied: association, partnership, firm, joint venture, trust or government agency; and (a) as at 8.00 am on the Second Court Date, the Deed Poll not having been terminated; (B) the person’s successors, permitted assigns, substitutes, executors and administrators; (b) as at 8.00 am on the Second Court Date, all of the conditions precedent set out in Schedule 1 of the Implementation (vii) to a law includes any legislation, judgment, rule of Agreement (other than the condition precedent set out in common law or equity or rule of any applicable stock item 3 of Schedule 1) having been satisfied or waived in exchange, and is a reference to that law as amended, accordance with the terms of that agreement; consolidated, supplemented or replaced and includes a reference to any regulation, by-law or other subordinate (c) the Court having approved this Scheme, with or without legislation; modification, pursuant to section 411(4)(b) of the Corporations Act, and if applicable, Lion Nathan and Kirin (viii) to any time is to Sydney time; having accepted in writing any modification or condition (ix) to “$” is to the lawful currency of Australia; and made or required by the Court under section 411(6) of the Corporations Act; and (b) the word “includes” in any form is not a word of limitation; (d) the coming into effect, pursuant to section 411(10) of the (c) where a word or phrase is defined, its other grammatical Corporations Act, of the orders of the Court made under forms have a corresponding meaning; section 411(4)(b) of the Corporations Act (and, if applicable, (d) headings are for convenience only and do not affect section 411(6) of the Corporations Act) in relation to this interpretation; Scheme.
(e) if a payment or other act must (but for this clause) be made 3.2 Certificate in relation to conditions precedent or done on a day that is not a Business Day, then it must be On the Second Court Date, Lion Nathan and Kirin will each made or done on the next Business Day; and provide to the Court a certificate confirming (in respect of (f) if a period must be calculated from, after or before a day or matters within their knowledge) whether or not all of the the day of an act or event, it must be calculated excluding conditions precedent set out in clause 3.1 of this Scheme (other that day. than the conditions precedent in clauses 3.1(c) and 3.1(d) of this Scheme) have been satisfied or waived as at 8.00 am on the Second Court Date. lion nathan SCHEME BOOKLET 2009
general terms continued
3.3 Certificate 6. Provision of Scheme Consideration
The certificates referred to in clause 3.2 will constitute 6.1 Consideration under this Scheme conclusive evidence of whether the conditions precedent No later than two Business Days before the Implementation referred to in clause 3.1 (other than the conditions precedent Date, Lion Nathan must procure Kirin to pay (or procure the in clauses 3.1(c) and 3.1(d) of this Scheme) have been satisfied payment of) the aggregate Scheme Consideration to the Trust or waived. Account in accordance with clauses 6.3. 4. Scheme 6.2 Joint holders 4.1 Effective Date of this Scheme In the case of Scheme Shares held in joint names, the aggregate Subject to clause 4.2, this Scheme will come into effect pursuant Scheme Consideration is payable to, and must be paid to, the to section 411(10) of the Corporations Act on and from the holder whose name appears first in the Lion Nathan Register as Effective Date. at the Scheme Record Date.
4.2 End Date 6.3 Satisfaction of obligations
This Scheme will lapse and be of no further force or effect if the The obligation of Lion Nathan to procure payment of the Effective Date has not occurred on or before the End Date. aggregate Scheme Consideration pursuant to clause 6.1 will be satisfied by Lion Nathan procuring Kirin, no later than two 5. Implementation of Scheme Business Days before the Implementation Date, to deposit (or 5.1 Lodgement of Court order procure the deposit of) the aggregate amount of the Scheme Consideration payable to all Scheme Participants in Immediately If the conditions precedent set out in clause 3.1 of this Scheme Available Funds into the Trust Account (provided that the (other than the condition precedent in clause 3.1(d) of this amount of any interest on the amount deposited in the Trust Scheme) are satisfied, Lion Nathan must lodge with ASIC in Account (less bank fees and other charges) will be credited to accordance with section 411(10) of the Corporations Act an Kirin’s account). office copy of the Court order approving this Scheme as soon as possible after, and in any event by no later than 4.00 pm on 6.4 Payment of Scheme Consideration the Business Day following, the date on which the Court (a) Subject to clause 6.5, within 5 Business Days after the approves this Scheme or such later time as Kirin and Implementation Date, subject to receipt of the aggregate Lion Nathan agree in writing. limite d 2009 Scheme Consideration in accordance with clause 6.3, 5.2 Transfer of Scheme Shares Lion Nathan must pay to each Scheme Participant an amount equal to the Scheme Consideration in consideration On the Implementation Date, but subject to Kirin making (or
nathan for each Scheme Share transferred to Kirin (or if applicable, procuring) the payment of the aggregate Scheme Consideration the Nominee) on the Implementation Date by that Scheme for the Scheme Shares in the manner contemplated by clause 6, lion Participant in accordance with clause 5.2. and Kirin having provided Lion Nathan with written confirmation 54 thereof: (b) Subject to clause 6.5, and unless otherwise directed by the Scheme Participant before the Implementation Date, the (a) all of the Scheme Shares, together with all rights and amounts referred to in clause 6.4(a) must be paid: entitlements attaching to the Scheme Shares as at the Implementation Date (excluding any entitlement to receive (i) if the Scheme Participant has a payment direction for an the Special Dividend or the Interim Dividend), will be Australian or New Zealand bank account recorded in the transferred to Kirin (or if applicable, the Nominee) without Lion Nathan Register as at the Scheme Record Date, by the need for any further act by any Scheme Participant direct credit to that account; or (other than acts performed by Lion Nathan as attorney and (ii) otherwise, by cheque drawn in Australian currency agent for Scheme Participants under this Scheme) by: to the Scheme Participant by pre-paid post to their (i) Lion Nathan delivering to Kirin (or if applicable, the address as recorded in the Lion Nathan Register as Nominee) a duly completed Share Scheme Transfer at the Scheme Record Date. executed on behalf of the Scheme Participants for 6.5 New Zealand Shareholders execution by Kirin (or if applicable, the Nominee); and (a) If the Scheme Participant has a payment direction for a (ii) Kirin (or if applicable, the Nominee) duly executing the New Zealand bank account recorded in the Lion Nathan Share Scheme Transfer and delivering it to Lion Nathan Register as at the Scheme Record Date, the amounts for registration; and referred to in clause 6.4 will be paid to the Scheme (b) Lion Nathan will enter the name and address of Kirin (or if Participant in New Zealand currency. applicable, the Nominee) in the Lion Nathan Register as the (b) To the extent that the Scheme Consideration is paid in holder of all of the Scheme Shares as soon as practicable New Zealand currency, the exchange rate for conversion of following receipt of the duly executed Share Scheme the Scheme Consideration from Australian currency into Transfer from Kirin (or if applicable, the Nominee) under New Zealand currency will be established by Lion Nathan clause 5.2(a)(ii). within two Business Days after the Scheme Record Date. 5.3 Entitlement to Scheme Consideration 6.6 Unclaimed monies On the Implementation Date, in consideration for the transfer to Lion Nathan may cancel a cheque issued under clause 6.4 or Kirin (or if applicable, the Nominee) of the Scheme Shares, each clause 6.5 if the cheque: Scheme Participant will be entitled to receive the Scheme Consideration in respect of each of their Scheme Shares in (a) is returned to Lion Nathan; or accordance with clause 6. LION NATHAN SCHEME BOOKLET 2009
(b) has not been presented for payment within six months after form will solely determine entitlements to the Scheme the date on which the cheque was sent. Consideration.
During the period of one year commencing on the 7.4 Effect of certificates and holding statements Implementation Date, on request from a Scheme Participant, Subject to provision of the Scheme Consideration and Lion Nathan must reissue a cheque that was previously registration of the transfer to Kirin (or if applicable, the Nominee) cancelled under this clause. contemplated in clauses 5.2 and 6.3, after the Scheme Record 6.7 Orders of a court Date:
In the case of notice having been given to Lion Nathan (or the (a) other than statements of holding in favour of Kirin (or if Lion Nathan Registry) of an order made by a court of competent applicable, the Nominee) and its successors in title after the jurisdiction: Implementation Date, all certificates and holding statements for the Scheme Shares will cease to have effect as (a) which requires payment to a third party of a sum in respect documents of title; and of Scheme Shares held by a particular Scheme Participant, which would otherwise be payable to that Scheme (b) other than entries on the Lion Nathan Register in respect of Participant in accordance with clause 6.4, then Lion Nathan Kirin (or if applicable, the Nominee) and its successors in shall procure that payment is made in accordance with that title, each entry on the Lion Nathan Register at the Scheme order; or Record Date will cease to have any effect other than as evidence of an entitlement to the Scheme Consideration. (b) which would prevent Lion Nathan from despatching payment to any particular Scheme Participant in accordance 8. General provisions with clause 6.4, Lion Nathan will retain an amount, in 8.1 Appointment of Lion Nathan as agent and attorney Australian dollars, equal to the number of Scheme Shares held by that Scheme Participant multiplied by the Scheme Each Scheme Participant, without the need for any further act, Consideration until such time as payment in accordance irrevocably appoints Lion Nathan as its agent and attorney for with clause 6.4 is permitted by law. the purpose of:
7. Dealings in Lion Nathan Shares (a) executing any document or doing any other act necessary or desirable to give full effect to this Scheme and the 7.1 Dealings in Lion Nathan Shares by Scheme Participants transactions contemplated by it, including executing a Share For the purpose of determining the persons that are Scheme Scheme Transfer; and Participants, dealings in Lion Nathan Shares will be recognised limite d 2009 (b) enforcing the Deed Poll against Kirin, by Lion Nathan provided that: and Lion Nathan accepts such appointment. Lion Nathan,
(a) in the case of dealings to be effected on CHESS or through nathan as agent of each Scheme Participant, may sub-delegate its FASTER, the transferee is registered in the Lion Nathan functions, authorities or powers under this clause 8.1 to all Register as the holder of the relevant Lion Nathan Shares on lion or any of it directors and officers (jointly, severally or jointly or by the Scheme Record Date; and and severally). 55 (b) in all other cases, registrable transfers or transmission 8.2 Scheme Participants’ consent applications in respect of those dealings are received at the place where the Lion Nathan Register is kept by 5.00pm on Each Scheme Participant irrevocably consents to Lion Nathan the day which is the Scheme Record Date (in which case and Kirin (or if applicable, the Nominee) doing all things and Lion Nathan must register such transfers by the Scheme executing all deeds, instruments, transfers and other documents Record Date), as may be necessary or desirable to give full effect to this Scheme and the transactions contemplated by it. and Lion Nathan will not accept for registration, or recognise for the purpose of establishing who are Scheme 8.3 Scheme Participant’s agreements Participants, any transmission application or transfer in Under this Scheme each Scheme Participant agrees to the respect of Lion Nathan Shares received after such times on transfer of their Scheme Shares, together with all rights and the Scheme Record Date. entitlements attaching to those Scheme Shares (excluding any 7.2 No disposals after Effective Date entitlement to receive the Special Dividend or the Interim Dividend), to Kirin (or if applicable, the Nominee) in accordance If this Scheme becomes Effective, a Scheme Participant (and with the terms of this Scheme. any person claiming through that holder) must not dispose of, or purport to agree to dispose of, any Lion Nathan Shares or any 8.4 Warranty by Scheme Participants interest in them after the Effective Date in any way except as set Each Scheme Participant is deemed to have warranted to Kirin out in this Scheme and any such disposal will be void and of no (and, if applicable, the Nominee), and is deemed to have legal effect whatsoever. authorised Lion Nathan to warrant to Kirin (and, if applicable, the 7.3 Maintenance of Lion Nathan Register Nominee) as agent and attorney for the Scheme Participant by virtue of this clause, that: For the purpose of determining entitlements to the Scheme Consideration, Lion Nathan will, until the Scheme Consideration (a) all of their Scheme Shares (including any rights and has been provided to Scheme Participants and Kirin (or if entitlements attaching to those shares excluding any applicable, the Nominee) has been entered in the Lion Nathan entitlement to receive the Special Dividend or the Interim Register as the holder of all of the Scheme Shares, maintain or Dividend) transferred will, on the date of the transfer of procure the maintenance of the Lion Nathan Register in them to Kirin (or if applicable, the Nominee) under this accordance with this clause 7.3. The Lion Nathan Register in this Scheme, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests and other lion nathan SCHEME BOOKLET 2009
general terms continued
interests of third parties of any kind, whether legal or vote at that meeting or vote against this Scheme) and, to the otherwise, and restrictions on transfer of any kind; and extent of any inconsistency and to the extent permitted by law, overrides the constitution of Lion Nathan. (b) they have the full power and capacity to sell and transfer their Scheme Shares (including any rights and entitlements 8.10 Enforcement of Deed Poll attaching to those shares). Lion Nathan undertakes in favour of each Scheme Participant to 8.5 Transfer free of encumbrances enforce the Deed Poll against Kirin on behalf of and as agent and attorney for the Scheme Participants. To the extent permitted by law, all Lion Nathan Shares (including any rights and entitlements attaching to those shares excluding 8.11 No liability when acting in good faith any entitlement to receive the Special Dividend or the Interim Neither Lion Nathan nor Kirin, nor any of their respective Dividend) which are transferred to Kirin (or if applicable, the officers, will be liable for anything done or omitted to be done Nominee) under this Scheme will, at the date of the transfer of in the performance of this Scheme in good faith. them to Kirin (or if applicable, the Nominee), vest in Kirin free from all mortgages, charges, liens, encumbrances and interests 8.12 Notices of third parties of any kind, whether legal or otherwise, and free (a) Where a notice, transfer, transmission application, direction from any restrictions on transfer of any kind not referred to in or other communication referred to in this Scheme is sent this Scheme. by post to Lion Nathan, it will not be deemed to be received 8.6 Title to Scheme Shares in the ordinary course of post or on a date and time other than the date and time (if any) on which it is actually received Subject to provision of the Scheme Consideration for the at Lion Nathan’s registered office. Scheme Shares as contemplated by clauses 5.3 and 6, on and from the Implementation Date and pending registration (b) The accidental omission to give notice of the Scheme by Lion Nathan of Kirin (or if applicable, the Nominee) in the Meeting to, or the non-receipt of such notice by, any Lion Nathan Register as the holder of all of the Scheme Shares, Lion Nathan Shareholder will not, unless so ordered by the Kirin (or if applicable, the Nominee) will be beneficially entitled to Court, invalidate the Scheme Meeting or the proceedings of all of the Scheme Shares transferred to it under this Scheme. the Scheme Meeting.
8.7 Appointment of Kirin as sole proxy 8.13 Further assurances
Subject to provision of the Scheme Consideration for the Lion Nathan will execute all documents and do all acts and things limite d 2009 Scheme Shares as contemplated by clauses 5.3 and 6, on (on its own behalf and on behalf of each Scheme Participant) as and from the Implementation Date and pending registration may be necessary or desirable to give full effect to this Scheme by Lion Nathan of Kirin (or if applicable, the Nominee) in the and the transactions contemplated by it. nathan Lion Nathan Register as the holder of all of the Scheme Shares, 8.14 Stamp duty each Scheme Participant: lion Kirin will pay all stamp duty (including any fines, penalties and (a) is deemed to have irrevocably appointed the President of interest) payable on the transfer by Scheme Participants of the 56 Kirin as their sole proxy and, where applicable, corporate Scheme Shares to Kirin (or if applicable, the Nominee). representative, to attend shareholders’ meetings of Lion Nathan, exercise the votes attached to the Scheme 9. Governing law and jurisdiction Shares registered in their name and sign any shareholders’ 9.1 Governing law resolutions, whether in person, by proxy or by corporate representative; This Scheme is governed by the laws of New South Wales.
(b) must not attend or vote at any shareholders’ meetings of 9.2 Jurisdiction Lion Nathan, or sign any resolutions, whether in person, Each party irrevocably and unconditionally: by proxy or by corporate representative, other than in accordance with this clause 8.7; and (a) submits to the non-exclusive jurisdiction of the courts of New South Wales; and (c) must take all other actions in the capacity of the registered holder of Scheme Shares as Kirin directs. (b) waives, without limitation, any claim or objection based on absence of jurisdiction or inconvenient forum. Lion Nathan undertakes in favour of each Scheme Participant that it will appoint the President of Kirin as that Scheme Participant’s proxy or, where applicable, corporate representative, in accordance with this clause 8.7.
8.8 Scheme alterations and conditions
If the Court proposes to approve this Scheme subject to any alterations or conditions, Lion Nathan may, by its counsel or solicitors, and with the consent of Kirin, consent to those alterations or conditions on behalf of all persons concerned, including, for the avoidance of doubt, all Scheme Participants, provided that in no circumstances will Lion Nathan be obliged to do so.
8.9 Effect of Scheme
This Scheme binds Lion Nathan and all Scheme Participants (including those who do not attend the Scheme Meeting, do not LION NATHAN SCHEME BOOKLET 2009
Annexure C - Deed Poll
Deed Poll
By Kirin Holdings Company, Limited (“Kirin”) in favour of each Scheme Participant
DATED 29 JULY 2009
contents
1 Definitions and interpretation 66 5 Representations and warranties 66 2 Conditions precedent and termination 66 6 Continuing obligations 66 3 Performance of obligations generally 66 7 Notices 66 4 Provision of Scheme Consideration 66 8 General 66
details
Parties Kirin
Kirin Name Kirin Holdings Company, Limited
Incorporated in Japan
Address c/- Blake Dawson
[Ref: 02-2005-5192] limite d 2009
225 George Street Sydney NSW 2000 nathan Fax 61 2 9258 6999 lion Attention Ian Williams / Carl Della-Bosca / David Ryan 57
In favour of Each person who is registered as the holder of fully paid ordinary shares in the capital of Lion Nathan Limited (ACN 093 160 448) of Level 7, 68 York Street, Sydney, NSW, 2000, Australia (“Lion Nathan”) as at the Scheme Record Date, other than an Excluded Shareholder (“Scheme Participants”).
Recitals A Kirin and Lion Nathan have entered into the Implementation Agreement.
B Kirin is entering into this Deed Poll for the purpose of covenanting in favour of Scheme Participants to perform its obligations in relation to the Scheme.
Governing law New South Wales
Date of agreement See Signing page lion nathan SCHEME BOOKLET 2009
general terms
1. Definitions and interpretation (b) each Scheme Participant retains the rights, powers or remedies the Scheme Participant has against Kirin in respect 1.1 Definitions of any breach of this Deed Poll which occurs before it In this Deed Poll: is terminated.
(a) Authorised Officer means, in respect of a party, a director 3. Performance of obligations generally or secretary of the party or any other person appointed by Kirin will comply with its obligations under the Implementation a party to act as an Authorised Officer under this deed; Agreement to do all acts and things as may be necessary or (b) Implementation Agreement means the Implementation desirable on its part to give full effect to the Scheme. Agreement between Kirin and Lion Nathan dated 10 May 4. Provision of Scheme Consideration 2009 under which, amongst other things, Lion Nathan has agreed to propose the Scheme to Lion Nathan Shareholders 4.1 Scheme Consideration (other than an Excluded Shareholder), and each of Kirin and Subject to clause 2, Kirin undertakes in favour of each Scheme Lion Nathan has agreed to take certain steps to give effect Participant to pay, or procure payment of, the aggregate to the Scheme; Scheme Consideration to the Trust Account in accordance (c) Scheme means the scheme of arrangement between with the Scheme. Lion Nathan and Scheme Participants under which all the 4.2 Manner of payment Scheme Shares will be transferred to Kirin (or if applicable, the Nominee) under Part 5.1 of the Corporations Act Kirin’s obligation to pay, or procure payment of, the aggregate substantially in the form set out in Annexure A of the Scheme Consideration pursuant to clause 4.1 will be satisfied by Implementation Agreement, or as otherwise agreed by Kirin Kirin, no later than two Business Days before the Implementation and Lion Nathan, subject to any alterations or conditions Date, depositing (or procuring the deposit of) the aggregate made or required by the Court pursuant to section 411(6) of amount of the Scheme Consideration payable to all Scheme the Corporations Act to the extent they are approved by Participants in Immediately Available Funds into the Trust Lion Nathan and Kirin in accordance with clause 8.8 of the Account (provided that the amount of any interest on the amount Scheme; and deposited in the Trust Account (less bank fees and other charges) will be credited to Kirin’s account). (d) unless the context requires otherwise, all other words and phrases defined in the Scheme have the same meaning in 5. Representations and warranties
limite d 2009 this Deed Poll. Kirin represents and warrants that: 1.2 Interpretation (a) it is a corporation validly existing under the laws of its place
nathan Clause 1.2 of the Scheme applies to the interpretation of this of registration; Deed Poll except that references to “this Scheme” in that clause (b) it has the corporate power to enter into and perform its lion are to be read as references to “this Deed Poll”. obligations under this Deed Poll and to carry out the 58 1.3 Nature of Deed Poll transactions contemplated by this Deed Poll; Kirin acknowledges that this Deed Poll may be relied on and (c) it has taken all necessary corporate action to authorise the enforced by any Scheme Participant in accordance with its entry into this Deed Poll and has taken or will take all terms even though the Scheme Participants are not party to it. necessary corporate action to authorise the performance of this Deed Poll and to carry out the transactions 2. Conditions precedent and termination contemplated by this Deed Poll; and 2.1 Conditions precedent (d) this Deed Poll is valid and binding upon it and enforceable Kirin’s obligations under clause 4 are subject to the Scheme against it in accordance with its terms. becoming Effective. 6. Continuing obligations 2.2 Termination This Deed Poll is irrevocable and, subject to clause 2, remains in Kirin’s obligations under this Deed Poll will automatically full force and effect until: terminate and the terms of this Deed Poll will be of no further (a) Kirin has fully performed its obligations under this Deed Poll; force or effect if: or (a) the Implementation Agreement is terminated in accordance (b) the earlier termination of this Deed Poll under clause 2.2. with its terms; or 7. Notices (b) the Scheme does not become Effective by the End Date. 7.1 Form - all communications 2.3 Consequences of termination Unless expressly stated otherwise in this agreement, all notices, If this Deed Poll is terminated under clause 2.2, then, in addition certificates, consents, approvals, waivers and other and without prejudice to any other rights, powers or remedies communications in connection with this agreement must be: available to Scheme Participants: (a) in writing; (a) Kirin is released from its obligations to further perform this Deed Poll except those obligations contained in clause 8.1 (b) signed by the sender (if an individual) or an Authorised and any other obligations which by their nature survive Officer of the sender; and termination; and (c) marked for the attention of the person identified in the Details or, if the recipient has notified otherwise, then marked for attention in the way last notified. LION NATHAN SCHEME BOOKLET 2009
7.2 Delivery (d) A party may not rely on any conduct of another party as a defence to exercise of a right, power, authority, discretion or Communications must be: remedy by that other party. (a) left at the address set out or referred to in the Details; 8.3 Variation (b) sent by prepaid ordinary post (airmail if appropriate) to the A provision of this Deed Poll may not be varied unless: address set out or referred to in the Details; (a) the variation is agreed to in writing by Lion Nathan; and (c) sent by fax to the fax number set out or referred to in the Details; or (b) the Court indicates that the variation would not, of itself, preclude approval of the Scheme, (d) given in any other way permitted by law. in which event Kirin will enter into a further deed poll in favour of However, if the intended recipient has notified a changed each Scheme Participant giving effect to the amendment. address or fax number, then communications must be to that address or fax number. 8.4 Rights cumulative
7.3 When effective The rights, powers and remedies of Kirin and of each Scheme Participant under this Deed Poll are cumulative and do not Communications take effect from the time they are received or exclude any other rights, powers or remedies provided by law or taken to be received under clause 7.4 (whichever happens first) equity independently of this Deed Poll. unless a later time is specified. 8.5 No assignment 7.4 When taken to be received The rights and obligations of Kirin and of each Scheme Communications are taken to be received: Participant under this Deed Poll are personal and must not be (a) if sent by post, three days after posting (or seven days after assigned, encumbered or otherwise dealt with at law or in equity posting if sent from one country to another); or and no person may attempt or purport to do so without the prior written consent of Kirin and Lion Nathan. (b) if sent by fax, at the time shown in the transmission report as the time that the whole fax was sent. 8.6 Further assurances
7.5 Receipt outside business hours Kirin will execute all deeds and other documents and do all acts and things (on its own behalf or on behalf of each Scheme Despite clauses 7.3 and 7.4, if communications are received or
Participant) as may be necessary or desirable to give full effect limite d 2009 taken to be received under clause 7.4 after 5.00pm in the place to this Deed Poll and the transactions contemplated by it. of receipt or on a non-Business Day, they are taken to be received at 9.00am on the next Business Day and take effect 8.7 Governing law and jurisdiction from that time unless a later time is specified. nathan This Deed Poll is governed by the laws of New South Wales. Kirin
8. General irrevocably and unconditionally submits to the non-exclusive lion jurisdiction of the courts of New South Wales. 8.1 Stamp duty 59 8.8 Service of process Kirin will: Without preventing any other mode of service, any document in (a) pay all stamp duty (including fines, penalties and interest) on a legal action, suit or other proceeding in the courts of New or in connection with this Deed Poll, the performance of this South Wales or courts of appeal from them (including, without Deed Poll and each transaction effected by or made, or any limitation, any writ of summons or other originating process or instrument executed, under this Deed Poll (including the any third or other party notice) may be served on Kirin by being transfer of the Scheme Shares to Kirin (or if applicable, the delivered to or left for Kirin at the address shown in the Details. Nominee)); and
(b) indemnify each Scheme Participant on demand against any liability arising from failure to comply with clause 8.1(a). EXECUTED as a deed poll
8.2 Waiver
(a) Waiver of any right arising from a breach of this Deed Poll or of any right, power, authority, discretion or remedy arising upon default under this Deed Poll must be in writing and signed by the party granting the waiver.
(b) A failure or delay in exercise, or partial exercise, of:
(i) a right arising from a breach of this Deed Poll; or
(ii) a right, power, authority, discretion or remedy created or arising upon default under this Deed Poll, does not result in a waiver of that right, power, authority, discretion or remedy.
(c) A party is not entitled to rely on a delay in the exercise or non-exercise of a right, power, authority, discretion or remedy arising from a breach of this Deed Poll or on a default under this Deed Poll as constituting a waiver of that right, power, authority, discretion or remedy. lion nathan SCHEME BOOKLET 2009
Signing page
DATED 29 JULY 2009
Signed on behalf of KIRIN HOLDINGS COMPANY, LIMITED, a corporation incorporated in Japan, by (a person who, in accordance with the laws of that place is authorised to sign this document for that corporation) and sealed and delivered as a deed by that corporation in the presence of:
Signature of witness Signature of authorised signatory
Name of witness Name of authorised signatory limite d 2009 nathan lion
60 Annexure D - Indepenent - D Annexure Dear Sirs ujc: AcquisitionbyKirin Subject: 5 August2009 Sydney NSW2000 68 YorkStreet Level 7 Lion NathanLimited The Independent Directors 4 3 2 1 4 1 Introduction 3 2 paid on 23 June 2009. 2009. June 23 on paid Being A$12.22 per share announced on 27 April 2009 less the interim dividend of A$0.22 per share Including aspecial dividend of A$0.50 per share. was interim5 June 2009. this dividend to entitlements date for determining record The The IBC comprises all of the directors of Lion Nathan other than Kirin representatives. share than Kirinanditsrelatedbodiesco its relatedbodies corporate) andtheC If theSchemeisapprovedbyLionNathan customary conditionsprecedent(assummar paid on23June2009. of A$12.22pershare.This includedthe interim dividendofA$0.22pershare the issued shares inLion Nathanthat Limited (Kirin)hadagreed Nathan’s IndependentBoard Committee On 27April2009LionNathanLimited (LionNathan)announcedthatLion (a) its relatedbodiescorporate)(theScheme arrangement betweenLionNathanandits The proposedacquisition ofthesharesistobe implemented byaschemeof agreement reachedon27 April2009. Implementation Agreement(the Agreement) withKirintoformalise the Subsequently, on11May2009LionNathan A$12.00 pershare.
4 (theCash Payments ),whichwillcomprise: Consideration) inrelation toeachshar Scheme cashconsiderationofA$11.50pershare(theScheme Liability unde approved limitedbyascheme E xpert’s xpert’s 2
Consequently,theofferconsideration Report keyterms underwhichKirinwouldacquireallof Holdings Company,Limited rporate) willreceiveA$12.00cashper r Professional StandardsLegislationr Professional it did not own for an offer consideration it didnotownforanoffer ourt, LionNathanshareholders(other 1 ) andissubjecttoalimited number of (IBC)andKirinHoldingsCompany, shareholders(otherthanKirinand shareholders (otherthanKirinand ised inSectionIof ourreport). announcedthatithadsignedan e heldattheScheme recorddate; 3 isnow www.lonerganedwards.com.au Facsimile: [61 2]82357550 Telephone: [61 2] 82357500 GPO Box1640, SydneyNSW2001 Sydney NSW2000 Australia Level 27, 363GeorgeStreet AFS LicenceNo246532 A BN 53095445560 1
61 lion nathan limited 2009 62 lion nathan limited 2009 6 5 5 9 8 Kirin HoldingsCompany,Limited 7 Lion Nathan Kirin will alsoreceive the Special Dividend. Nathan shareholders. to approvetheScheme, whichif votes castontheresolution.Ifthiso person orbyproxy)andvotingatthe the Scheme ispassedbyamajority of Scheme is approved byLionNathanshare of ourreport.UndertheCorporations its relatedbodies corporate” as“Lion Nathanshareholders” intheremainder reporting wehavereferredto“LionNath shareholders otherthanKirinandits The Scheme issubjecttotheCourt diluted basis)atapproximately A$6.4billion. The proposedtransactionvaluesallth (b) Farmers. Australia’s largestmilk processor, In Australia, inadditiontoitsLi 30% ofrevenueandprofitoutsideJapanby2015. company). Thecompany hasstatedthat Philippines) anda50.8%interestinMe 48.3% interestinSanMiguelBrewery investments outsideJapanincludeitsex agri-bio products.Kirinisthesecond largestbrewer inJapanwhileits operates apharmaceuticals division andsuppliesbiochemical, chemical and focus onthesaleofalcoholicbeverage Based inJapan,KirinisanAsianfood employs more than3,200people. A$3.4 billion, LionNathan generates strongstable earnings andcashflow spirits withanumber ofitsbrandsdistributed globally.With assetsof distributes andmarkets beer,finewi Australia, NewZealandandinternati Lion Nathanisapremium alcoholicbe
available NewZealandimputationcredits). imputed forNewZealandresidentsh will befully franked for Australian resident shareholders and partially relation to each share held atthe Special Dividend recorddate which a specialdividendofA$0.50pershare and
on Nathan shareholdingKirinowns approved, willbecome bindingonLion National Foods,whichincludes Dairy convening ameeting ofLionNathan’s ne, ready-to-drink(RTD)beveragesand ccurs asecondCourthearingwillbeheld onal markets. Thecompanyproduces, related bodiescorporate.Foreaseof Scheme meeting, andby75%ofthe e sharesinLionNathan(onafully Act2001(Cth)(CorporationsAct),the Lion Nathanshareholderspresent(in s andnon-alcoholicdrinks.Italso verages company withoperationsin Inc (thelargestbrewerinthe and beveragecompany withaprimary rcian Corporation(aJapanese wine isting 46.1%interestinLionNathan,a one ofitsobjectivesistogenerate an shareholdersotherthanKirinand holders ifaresolutioninfavourof areholders (basedonthelevelof 5 (theSpecialDividend)in 2
12 11 report Purpose of 10 7 6 17 16 15 Summary ofopinion 14 13 rate foryearto 31 December 2008). Market capitalisation of ¥1,285 billion converted at 1¥ = A$0.013 as at 30 June 2009. asat30June 2009. at = 1¥ A$0.013 converted billion ¥1,285 of capitalisation Market exchange (average = A$0.01168 1¥ at converted billion ¥2,303.569 of revenue sales Consolidated Further, theScheme issubjecttoa Corporations Regulations. Corporations Act,andRegulation5.1.01Part3ofSchedule8the prepared forLionNathanshareholde there isaregulatory requirement foran the ordinarysharesonissue)andhasthreedirectorsLionNathan’sBoard, As Kirinholds246.45millionsharesinLionNathan(representing46.1%of capitalisation ofapproximately A$16.7billion. approximately A$26.9billion In theyearended31December 2008Kirin We havearrivedatthisconclusi Scheme. We thereforerecommend thatLionNathanshareholdersvoteinfavourofthe shareholders. the Scheme isfairandreasonable LEA hasconcludedthattheacquisition interest intheproposedScheme. LEA isindependentofLionNathanand reasonable andinthebestinterestsofLionNathanshareholders. expert’s report(IER)statingwhether, Lonergan Edwards &AssociatesLim Accordingly, theIndependentDirectors of LionNathanhaverequestedthat the bestinterestsofLionNathanshareholders. precedent, includinganindependent expert
6 andasat30June2009hadamarket on forthereasonssetoutbelow. limited number of customaryconditions rs pursuanttosection412ofthe ited (LEA)prepareanindependent in ouropinion,theScheme isfairand in thebest interests of LionNathan independentexpert’sreporttobe of LionNathansharesbyKirinunder Kirin andhasnootherinvolvement or concludingthat theScheme isin had consolidated salesrevenueof 7
3
63 lion nathan limited 2009 64 lion nathan limited 2009 18 Valuation ofLionNathan 8 21 Assessment oftheScheme 20 19 Value ofCashPayments Dividend will depend on the exchange ratebetw exchange the on depend will Dividend the SpecialDividend. approxima that is itisexpected Dividend declared, While the exact amount of New Zealand imputation credits that can be attached to the Special basis atbetweenA$10.95toA$12.21pershareassummarised below: LEA hasvalued100%ofthesharesin Lion Nathanonacontrollinginterest Nathan shareholdersifth We summarise below the likely advantagesanddisadvantagesforLion greater thanA$12.00pershar Australian andNewZealandresidentshareholdersinLionNathan may be attached totheSpecialDividend,va per share)andNewZealandimputati However, duetothebenefitofAustra received byLionNathanshareholders. Scheme wehaveadoptedthetotalc Dividend ofA$0.50persharetobepaid Consideration ofA$11.50cashpershare As notedabovetheCashPayments of (A$) share per Value Shares on issue Value of 100%Lionof Nathan Net debt Other surplus assets Little in Be Value World of shares Nathan Lion of 100% of Value Enterprise value EBITDA multiple Operating EBITDA
e Scheme isagreedto.
e (onapre-taxbasis). verages Limited (LWB) 38.8 42.3 42.3 38.8 Limited (LWB) verages een Australia and New Z New and Australia een tely NZ$0.29 imputation credits will be attached to to credits will beattached imputation tely NZ$0.29 onsideration ofA$12.00persharetobe on credits(ofuptoNZ$0.29pershare lian frankingcredits(ofuptoA$0.21 A$12.00persharecomprisetheScheme lue oftheCashPayments tosome byLionNathan.Inevaluatingthe to bepaidbyKirinplusaSpecial ealand when the Special theSpecial when ealand 1800 (1,880.0) (1,880.0) ,5. 6,525.1 5,851.6 ,4. 8,312.5 7,647.5 A$10.95 A$12.21 A$12.21 A$10.95 A$m Low Low 6. 665.0 665.0 3. 534.2 534.2 15 12.5 11.5 53 50.3 45.3
High A$m
8 ) 4
22 Advantages 9 25 24 Disadvantages 23
Referparagraph 173 for further information, includ (b) (a) The Scheme hasthefollowingbenef years we expectLion Nathantoachievefurthe In particular,basedoninformation revi Payments. result ofongoingoperationsoveranda therefore not participate inanyfutu no longerholdaninterestinLionNath Lion Nathan shareholders shouldnotethatiftheScheme isapprovedtheywill shares willbereceivedpriortotheScheme meeting. shares thereisnorealisticlikelihoodth Further, itshouldbenotedthatasKi (e) (d) (c) of thisfuture earnings potential isreflected inthe CashPayments.
9 . However,ourvaluationofLionNathanconfirms thatthe current value market prices ofLionNathanshar the CashPayments representa Investments Commission (ASIC)RegulatoryGuide111 assessed under theguidelines setout inAustralian Securities & per share,and aretherefore fairto assessed valuerangefor100%ofLionNathanA$10.95toA$12.21 the CashPayments ofA$12.00cashper with theportfolio nature of significant discounttoourvaluation offer orproposal,thepriceofLionNath if theSchemedoesnotproceed,and some shareholdersbyuptoA$0.21pershare shareholders respectively, therebyincreasing thepotential value to imputation creditstoLionNathan the SpecialDividendallows to targetcompanyshareholders furthermore, thepremium exceedsobserved premiums generallypaid Lion Nathanclosingshareprice initial approachbyKirin(on23Ap
individualshareholdings). re valuecreatedbytheCompanyasa ecasts for future years. ing detailsof broker forecastsfuture its forLionNathanshareholders: rin alreadyowns46.1%ofLionNathan significant premium totherecent incomparable circumstances an. LionNathanshareholderswill bove thatreflectedintheCash at acompeting offerforLionNathan ewed forthepurposesofthisreport, release offrankingcreditsand r increases inprofitability infuture ’s AustralianandNewZealand LionNathanshareholderswhen es priortotheannouncement ofthe ril 2009)andarehigherthanany and theCashPayments (consistent in theabsence ofanalternative an sharesislikelytotradeata share lieatthehighendofour
5
65 lion nathan limited 2009 66 lion nathan limited 2009 27 General 26 Conclusion Authorised Representative Craig Edwards Yours faithfully 28 The impact ofapprovingtheScheme interests ofLionNathanshareholders. Nathan sharesbyKirinundertheScheme is On balance,giventheaboveanalysis our report. opinion, werecommend thatLionNathan advice. ForourfullopinionontheSc dealt withinthisreport,shareholders doubt abouttheactiontheyshouldtakein assessment of their owncircumstances. under theScheme shouldbebasedon eachLionNathanshareholders’ The ultimate decision whethertoapprove theacquisition of shares byKirin in doubtastothetaxationcons Implications forShareholders)andcons Nathan shareholdersshould readSection5oftheScheme Booklet(Taxation shareholders dependsontheindividual circumstances ofeach investor. Lion equences oftheScheme. onthetaxpositionofLionNathan , weconsidertheacquisitionofLion shouldseekindependentprofessional Authorised Representative Martin Holt heme andthereasoningbehindour IfLionNathanshareholdersarein ult theirownprofe relationtotheScheme ormatters shareholders readtheremainder of fairandreasonableinthebest ssional advisers if 6
Table of contents
VI V
IV III II I Section Implied EBIT andPEmultiples ValueofLionNathan 195–203 Sharesonissue Netdebt Other AucklandBrewerysalereceivable assets Investment inLittleWorldBeveragesLimited Valueofcorebusiness EBITDAmultiple Assessment ofnormalisedEBITDA Valuationmethodology Methodologyselected Outlook NewZealandbeermarket Outlook Australianbeermarket Overview Sharepriceperformance 34–35 29–32 33 Sharecapital Financialposition Financialperformance Currentoperations History Overview Limitations andrelianceoninformation Basisofassessment Purpose Resolution Conditions Terms Valuation of100% ofLionNathan Valuation approach Overview ofAustraliaandNew Zealand beerindustries Profile ofLion Nathan Scope ofourreport Key terms oftheScheme
181–193 148–157 204–207 169– 171 123–143 48–53 209–211 165–168 158–159 144–147 57–85 56 54–55 36–41 212 194 160–164 122
93–114 213 214–216 208 42–47 115–118 172– 180 119–121 86–92 Paragraph
7
67 lion nathan limited 2009 68 lion nathan limited 2009
H G F E D C B A Appendices VII Section 220–252 Glossary Transaction multiples –wine Tradingmultiples of listed comparables –wine Transaction multiples –beer Historicaloperating performance bysegment Qualifications, declarationsandconsents Financial Services Guide Assessment oftheScheme Trading multiples of listed comparables Evaluation oftheProposal
− beer
217–219 Paragraph
8
paid on 23 June 2009. 2009. June 23 on paid 29 Terms Keytermsofthe Scheme I 13 12 11 10 32 31 30 Being A$12.22 per share announced on 27 April 2009 less the interim dividend of A$0.22 per share Including aspecial dividend of A$0.50 per share. was interim5 June 2009. this dividend to entitlements date for determining record The The IBC comprises all of the directors of Lion Nathan other than Kirin representatives. consideration Company, Limited (Kirin) hadagreed Nathan’s IndependentBoard Committee On 27April2009LionNathanLimited (LionNathan)announcedthatLion (b) (a) share Nathan shareholdersnot associated If theSchemeisapprovedbyLionNath customary conditionsprecedent(assummarised below). its relatedbodiescorporate)(theScheme arrangement betweenLionNathanandits The proposedacquisition ofthesharesistobe implemented byaschemeof agreement reachedon27 April2009. Implementation Agreement(the Agreement) withKirintoformalise the Subsequently, on11May2009LionNathan A$0.22 persharepaidon23June2009. consideration ofA$12.22pe acquire allof theissuedsharesinLionNathanthatitdidnotownforanoffer
13 (theCash Payments), whichwillcomprise: available NewZealandimputationcredits). imputed forNewZealandresidentsh will befully franked for Australianresident shareholders and partially relation toeach share held attheSpecial Dividend recorddate which a specialdividendofA$0.50persh and Consideration) heldinrelation toeachshareatthe Scheme recorddate; Scheme cashconsiderationofA$11.50pershare(theScheme 12 isnowA$12.00pershare.
r share.Thisincludedtheinterimdividendof with Kirinwill receiveA$12.00 cashper keyterms underwhichKirinwould 11 an shareholdersandtheCourt,Lion 10 ) andissubjecttoalimited number of Consequently,theoffer (IBC)andKirinHoldings shareholders (otherthanKirinand are (theSpecialDividend)in announcedthatithadsignedan areholders (basedonthelevelof 9
69 lion nathan limited 2009 70 lion nathan limited 2009 approval for the acquisition of the shares in Lion Nathan it does not already own. own. it already does thenot sharesin Lion Nathan of acquisition proposed
33 Conditions 15 14 Lion Nathan announced on 19 June 2009 that Kirin had received Foreign Investment Review Board in Kirin’s intervene to ACCC not propose thatthe did June 2009 on 29 announced Lion Nathan (g) Agreement betweenLionNathanandKirindated10May2009: conditions precedent, includingthe followingwhichareoutlined inthe (e) The Scheme issubject to thesatisf (f) (a) (d) (b) (c)
Scheme orpayment oftheSpecialDividend NZCC) preventingtheimplementation by theCourtorotherregulatoryauthority(suchasACCCand otherwise imposingalegalrestraint no order,injunction,decree,ruling Scheme orpayment oftheSpecialDividend NZCC) preventingtheimplementation by theCourtorotherregulatoryauthority(suchasACCCand otherwise imposingalegalrestraint no order,injunction,decree,ruling Scheme orpayment oftheSpecialDividend reasonably, arenecessarytoimplem than ataxauthority)whichKiri approvals from allrelevantAustrali intervene intheacquisition own, oradvisingKirinthatitdoes to Kirin’sacquisitionoftheLionNathansharesitdoesnotalready having commenced orthreatenedto commenceproceedings inrelation the Australian Competition and Consumer Commission (ACCC)not Kirin andsuchconsentisnotwithdrawn and TakeoversAct1975(Cwlth)) to beempowered tomake anyorderunderthe following noticeoftheproposedacquisition,Treasurerhasceased already ownbyKirinunderAustralia’ objection totheacquisitionof the acquisitionofLionNathan the NewZealandOverseasInvestment Office(OIO)givingconsentto the AustralianFederalTreasurer’s Kirin’s acquisitionofth commenced orthreatenedtocommence proceedingsinrelationto the NewZealandCommerceCommission (NZCC)nothaving or havinggivenclearancegrantin
e LionNathansharesitdoesnotalreadyown, action ofalimited number ofcustomary 14
n andLionNathanagree,acting 15 Lion Nathansharesitdoesnot not intendtoopposeorotherwise shares itdoesnotalreadyownby written advice thatthereis no or otheractionrestraining or otheractionrestraining
an regulatoryauthorities(other or prohibitionhavingbeenissued or prohibitionhavingbeenissued g authorisation totheacquisition ent anymaterial aspectofthe s foreigninvestment policy(or, of anymaterialaspectthe of anymaterialaspectthe Foreign Acquisitions 10
conditions are met. conditions 16 35 34 Resolution It is currently expected that the Scheme will be implemented in October 2009 provided all the inOctober provided implemented 2009 Scheme thatwillbe the expected Itiscurrently (l) (k) (j) (i) (h) Lion Nathanshareholders. Scheme. OncetheCourt approvestheScheme itwillbecome bindingon all lodge theorderswithASIC anddoallth to theCourtforordersap If theresolutionispassedbyrequis the Scheme Booklet. with theresolution containedinthe Lion Nathan shareholders willbeasked tovoteon theSchemeinaccordance
agree. 31 December 2009orsome otherdateasKirinand LionNathan reasons, includingtheScheme notbecomingby effective the Agreement notbeing terminated, interests ofLionNathanshareholders an independentexpertconcludingth occurred inrespectofLionNathan no “material adversechange”(asdefinedintheAgreement) having the Agreement andat8.00am SecondCourtDate onthe Agreement beingtrueandcorrectina the representationsandwarrantiessetoutinschedules56of 411(4)(b) oftheCorporationsAct approval oftheScheme bytheCourtinaccordance withSection 16
proving theScheme, andifthatapprovalisgiven, notice ofScheme meeting accompanying ite majorities, LionNathanmust apply ings necessarytogiveeffectthe at theScheme isinthebest which may occur foranumber of ll material respects at thedateof 11
71 lion nathan limited 2009 72 lion nathan limited 2009 41 40 37 39 38 36 Purpose Scopeofourreport II
with inthisreport,shareholdersshou about theactiontheyshouldtakeinre Lion Nathanshareholder’sassessment of The ultimate decision whethertoapprovetheScheme shouldbebasedoneach reasonable andinthebestintere our reportistodetermine whether,in Scheme BooklettobesentLionNath Scheme. Ourreportwillaccompany shareholders toassisttheminconsidering the resolution toapprove the This reporthasbeenpreparedbyLEA forthebenefitofLionNathan voting sharesinthecompany,orwherea provide that,whereapartytothetrans Regulation 5.1.01andPart3ofSchedule Nathan shareholdersandth Kirin undertheScheme isfairandreasona prepare anIERstatingwhetherthe The IndependentDirectorsofLionNath millionKirin holds246.45sharesinLi that opinion. proposed scheme isinthebestinterest accompanied by anindependentexpert’s report (IER)assessing whetherthe of thecompany thesubject ofthesche pursuant tosection411ofth be senttoshareholders Regulations 2001(Cth)(CorporationsRegul governs schemes ofarrangement. Part and hastobeeffectedpursuantPart5.1oftheCorporationsAct,which The Scheme issubjecttotheCorpora Lion Nathanshareholderspursuanttos Accordingly, thereisaregulatoryrequire ordinary sharesonissue)andhasthre in relation toamembers’ scheme of arrangement e reasonsforthatopinion. e CorporationsAct. sts ofLionNathanshareholders. proposed acquisitionofLionNathanby ld seekindependentprofessional advice. ouropinion,theScheme isfairand the Notice ofScheme Meetingand tions Act2001(Cth)(CorporationsAct) e directorsonLionNathan’sBoard. lation totheScheme ormatters dealt me, theexplanatory statement must be s ofshareholdersandstatereasonsfor action holdsnotlessthan30%ofthe on Nathan (representing 46.1%ofthe ection 411oftheCorporationsAct. 3 ofSchedule8theCorporations an shareholders.Thesolepurposeof an havethereforerequestedLEAto ny ofitsdirectors ment foranIERtobeprepared their owncircumstances. Ifindoubt 8 oftheCorporationsRegulations ble andinthebest ations) prescribesinformation to are alsodirectors interestsofLion 12
47 46 45 44 43 42 Basis ofassessment 17 ASIC Regulatory Guide 111 “Content of Expert’s Reports”. Reports”. Expert’s of 111 “Content Guide Regulatory ASIC (i) (h) (g) (f) (e) (d) (c) (b) (a) Nathan shareholders: whether theScheme andreasonab isfair The followingfacts,amongothers,havebeenconsideredwhen determining Lion Nathanshareholders. under ASICRegulatoryGuide111itmust al Guide 111.Further,inouropinion,if have assessedtheSchemeundergui As Kirinwillacquire100%ofLionNa any higherbidbeforethecloseofoffer. other significantfactors,shareholderss offer may also bereasonableif,despite Regulatory Guide111considersanofferto of thetargetcompany. mustbemadesubject oftheoffer.Acomparison assuming 100%ownership price or consideration isequaltoor great Pursuant toRegulatoryGuide111,anoffer expert’s reportspreparedforthepur Regulatory Guide111establishescertain best interests”,implying thatitissimilar to“fairandreasonable”. Regulatory Guide111 There isnolegaldefinitionoftheexpr
associated with the Scheme. ownership andcontrolissuesother qualitative andstrategic issues approved the likelymarket priceofLionNathansharesiftheScheme isnot a higheralternativeofferbeingmade the valueofLionNathantoanalte to theannouncement Scheme ofthe the listedmarket priceof LionNathansharespriortoandsubsequent shareholders extent towhichthosesynergiesar the levelofsynergieslikelytobegeneratedbyanacquirerand shareholders the extentto whichacontrol premium isbeingpaid toLionNathan offer isfairunderASICRegulatoryGuide111) the extenttowhich(a)and(b)di the valueofconsid the market valueof100%thesharesinLion Nathan 17
giveslimited guidanceastothemeaning of“inthe eration offeredbyKirin poses oftheCorporationsAct. the Schemeis“fairandreasonable” ession “inthebestinterests”.ASIC than iftheScheme isapprovedwe hould accepttheofferinabsenceof notbeing“fair”but delines setoutinASICRegulatory ffer (inordertoassesswhetherthe le andinthebestinterestsofLion er than thevalueofsecurities the e beingpaidawaytoLionNathan guidelines inrespectofindependent rnative offerorandthelikelihoodof be“reasonable”ifitisfair.An is “fair”ifthevalueofoffer so be“inthebestinterests”of afterconsidering 13
73 lion nathan limited 2009 74 lion nathan limited 2009 more stable at the more ofthis atthe date stable report. 48 Limitations andrelianceoninformation 18 53 52 51 50 49 This has been particularly the case throughout 2008 and 2009, although market conditions appear appear conditions market although and 2009, 2008 casethroughout the particularly been This has over relativelyshortperiodsoftime. prevailing atthedateofthisreport. Our opinionsarebasedontheeconomi (b) (a) In forming ouropinion,wehavealsoassumed that: budgets withconsequentialvaluationimpacts. of management. Actualresultsmay va based onassumptions offutureevents by management offutureeventswhich profits. Budgetsandforecastsareinhere We innowayguaranteethe verification orvalidation. be recognisedthatsuchinformation is notalwayscapableofexternal through analysis,enquiryandreviewtoth the relevantcompanies. Thistypeof kind expressedinthisreportistheopin An important partoftheinformation ba equivalents toInternationalFina provided toushasbeenprepared We understandtheaccounting andother financialinformation thatwas undertaken. investigation might disclo of thematters which anaudit, extensive examination or“duediligence” limited andwedonotwarrantthatourenqui Lion Nathanshareholders.However,inassignments suchasthis,time is opiniononthe the purposeofforming an information providedwasevaluatedthr and wehavenoreasontobelievethatma believe that theinformation provided isreliable, complete and notmisleading Lion Nathan.We haveconsideredan Our reportisalsobaseduponfinancia
the Scheme itself. accordance withtheterms setoutintheAgreement andthe terms of if theSchemebecomes legallyeffective, itwillbe implemented in and fairly presented inallmaterial respects the information setout intheSchemeBookletiscomplete, accurate
se. Noneoftheseaddi achievability ofbudgetsor ncial ReportingStandards(AIFRS). inaccordance withtheAustralian Such conditionscanchangesignificantly 18 information hasalsobeenevaluated d relieduponthisinformation and l andotherinformation providedby , many ofwhicharebeyondthecontrol
ry significantly from forecasts and c, market and other conditions ions andjudgement ofmanagement of ough analysis,enquiryandreviewfor cannot beassuredandarenecessarily se usedinforming anopinionofthe ntly uncertain.Th terial factshavebeenwithheld.The Scheme from theperspective ofthe e extentpractical.However,itmust ries haveidentifiedorverifiedall tional taskshavebeen forecastsoffuture ey arepredictions 14
trading halt in in NathanLion shares. halt trading 22 on of $8.31 price share a on based billion A$4.4 55 54 Overview ProfileofLionNathan III 19 56 History Based on the Cash Payments of $12.00 per share. share. per $12.00 Paymentsof Cash the on Based approximately A$6.4billion. the NewZealandStockExchange (NZSE) Lion NathanislistedonboththeAust to-drink (RTD) spiritbusinesses. beer producers.Italsohascomplement Australian andNewZealandmarkets LionNathanisoneofthetwomajor on theproduction,marketing, salesand Lion Nathan isaleadingAustralasian beveragecompanywithaprimary focus out inthetablebelow: A summary ofLionNathan’shistoryasit 2002 2001 2000 1998 1993 1992 1990 Calendar year 1988 1988 • • • • • • • • • • Description
listing to to Australia. listing Lion Nathan changed its domicile and primary stock exchange Kirin acquired a 45%interest in Lion Nathan. Brewing, and the South Australian Brewing Company. Lion Nathan acquired New South Wales boutique brewer, Hahn the in market. Victorian was established Tooheys umbrella. began operating as independent breweries under the Lion Nathan an Perkins Castlemaine Tooheys, Lion Nathan acquired the remaining 50% of Natbrew Holdings. Brewing. Swan and Tooheys Castlemaine ownedBond’s Alan brewing assetsin Australia including which in Natbrew a share Holdings, 50% Nathan bought Lion Breweries. Lion operator, hotel and &Co, withbrew merged Nathan Lion Nathan wasformed when New Zealand's largestretailer,LD New Zealand wine company Hills. company New Zealand Wither wine Lion Nathan added to its premium wine business by acquiring Wines. Argyle based Oregon and St Hallett Tatachilla, Smithbrook, Knappstein, Mitchelton, Petaluma, Croser, Stonier, as such included brands The acquisitions PetalumaBanksia. and Lion Nathan purchased premium Australian wine companies
19 Itiscurrently46.1%ownedbyKirin. April 2009, the last day of trading tothe prior lastday oftrading the April 2009, Note thatLionNathan’s market capitalisation was ralian Securities Exchange (ASX)and ary spirits,nichefinewineandready- distribution ofbeer.Inboththe relates to itscurrent operations isset withamarket capitalisation of er, wine and spirit manufacturer manufacturer er, andspirit wine d the Swan Brewing Company 15
75 lion nathan limited 2009 76 lion nathan limited 2009 58 57 Current operations Nathan hasover1,800employeesinAust Zealand. Anichefinewine business is operatedinbothcountries. Lion RTD businessandLionNathandistribut and company ownedspirits.TheNewZeal locally produced Heineken andBacardi- In AustraliaLionNathanhasestablished related assetscomprise 90%of operation withsixbreweriesinAustra and theleadingsupplierinNewZealand.Itoperatesacomprehensive beer Lion Nathan isthesecond largest supplier of alcoholic beverages inAustralia 2008 2007 2006 2004 Calendar year 2003 2003
• Description • • • • • •
brands inAustralia. brands market, sell and distribute a range of ready-to-drink and spirit and LionNathanBacardi-Martini major shareholder The Coca-Cola Company ceaseddiscussions. Scheme of Arrangement. The deal did not eventuate after CCA’s a through CCA acquire would Nathan Lion whereby merger a potential regarding wereindiscussions that confirmed they In November LionNathan and US was taken over acompetitor. by thewine sales in USA market, afteritsexisting the distributor in Wine Inc toincreaseLion Nathan’s Australian and New Zealand Cumulus USAwine the importer acquired In June Lion Nathan million. A$325 for 2008 January Tasmanian brewer JBoag & Son (Boag’s) was acquired in moved to full national distribution. distillery foran undisclosed amount, while McKenna Bourbon In April Lion Nathan acquired the Inner Circle Rum brand and RTDbrands. and spirit both with by Lion Nathan waslaunched Bourbon McKenna in Australia. sellHeineken and Heineken and Lion Nathan established a joint venture to produce Lion Nathan’stotal assets. lia andfourinNewZealand.Beer Martini for thedistribution ofBacardi es DiageoPlc’sbrandsinNew joint ventures withHeinekentosell ralia andover1,400inNewZealand. and operationsincludeaspirits Coca-Cola (CCA) AmatilLimited establisheda jointventureto 16
59 61 60
Brewery, A sample ofLionNathan’smajor br to premium products. national focusforthosecorebrandsa placed onthe brandequity ofitsexisti international wineexportmarkets. As seek growthopportunitiesin the existingcorebeerbusinesses,optimis Management’s strategicfocusistoma Zealand issetoutbelow: A geographicaloverviewofLionNathan’s Breweries Wineries Wineries Smithbrook Swan Perth
Pemberton Premium Brands Regional Brands Winery, Winery, (Power Brands) Premium Wine Stonier Winery, Mornington Peninsula Peninsula Winery, Mornington Stonier Mitchelton Winery, Central Victoria Valley Winery,Barossa Hallett St Hills Adelaide Winery, Petaluma Nationwide Nationwide Brands Selected Ma South Australian South Knappstein Winery, Knappstein Brewing Co,
Adelaide Clare Valley
thespiritsandRTDmarkets, aswellthe Launceston j or LionNathanBrands Boag’s, ands bycategoryaresetoutbelow:
nd encouragingconsumers to‘tradeup’ ng core brands,thedevelopment ofa apartofthisstrategyemphasisis ximise andenhancetheperformanceximise of e valueinthefinewinebusinessand facilitiesinAustraliaandNew Lion Breweries (Speight’s), Breweries Lion Sydney Shovel, &Malt Tooheys
Brisbane Castlemaine Perkins, Auckland Lion Breweries, Marlborough Marlborough Dunedin Wither Hills,
Christchurch (Canterbury), Lion Breweries Wellington (Mac’s), Lion Breweries Co., Auckland Co., Bottling Contact
17
77 lion nathan limited 2009 78 lion nathan limited 2009 62 Lion NathanAustralia 66 65 64 63 Australia –beer company isthenumber twooperator operating profits,istheprimary driverofLionNathan’sperformance. The Australia, whichaccountsfor75%ofgroupassetsandover80% Boag’s brandsandhigher leve per annum. Thebrewery expansionhas Tasmanian brewery,withaplannedincrease incapacity to100 million litres share. Thecompany subsequentlyannounced amajorupgradeofthe 7% oftheAustralianpremium beermark In January2008LionNathanacquiredJBoag& Son(Boag’s),addingsome Moretti brands. joint venturewhileHeinekenprovidesandmarkets theHeineken, Amstel and Nathan providesthebrewing,logistics, (Heineken) todistributearangeofHe During 2004LionNathanenteredajointventure withHeinekenNV summarised below: broad appeal.Asample ofLionNathan’sAustralianbeer ‘power brands’,i.e.brandssoldAust Lion Nathanhasbeensuccessfulines carbohydrate (lowcarb)beers. contemporary beerindustrytrendssuchastheshifttopremium andlow cannibalisation ofexistingbrands acquiring) newbeerbrands.Thepartia and Foster’sGrouphaverecently been more partialtoarangeofbrands.To Australian beer consumers arebecoming lessloyaltooneparticularbrandand As discussedinSectionIV,andconsis market leader inboth these sectors. retail value)respectively. beverages andbeersectors,withmark Nationwide brands Lion Nathan – Australian brand portfolio Hahn Premium Light James Squire (all brands) West End Draught Draught WestEnd James(all brands) Squire Hahn Super Dry Steinlager Hahn Light Premium Hahn Premium Tooheys Extra Dry Tooheys New XXXX Bitter XXXX Gold Foster’sGroupLimited (Foster’sGroup)isthe Becks Heineken Heineken Kirin ae ogsPeim BarefootRadler JamesBoag’s Premium Premium brands Platinum Dry Extra Toohey’s Amstel ls ofpromotional activity. . The newbrandscapitaliseon ralia-wide thatarewellrecognisedwith meet thispreferencebothLionNathan in boththeAustralianalcoholic ineken productsinAustralia.Lion tablishing anumber et sharesof24%and40%(basedon
tent withtheexperienceoverseas, releasing (orinthe caseofBoag’s l costofthishoweverhasbeenthe sales andbackofficefunctionsofthe coincided withtheaddition ofnew et toLionNathan’sexistingmarket Boag’s Draught Boag’s Classic Blonde ClassicBlonde Boag’s Tooheys NewStag White Specialty /regional brands Boag’s St George Emu Bitter Swan Draught of nationwide or brand portfoliois 18
Lion Nathan, who together accoun 67 20 72 71 New Zealand–beer 70 Lion NathanNewZealand 69 68 Australia –spiritsandRTDbeverages Beer production and distribution in Australia by comparison is dominated by Foster’s Group and projects areduetobecomplete over thepasttwoyears,tolowercost Lion Nathanhasalsooverhauledkeyco objective wastoleveragethefullbrand structure, which encompasses beer,sp results, theNewZealandbusinessha changes (smoking bans)andretailindustr Since 2005,whenanextremely competitiv recent years. Zealand hasprovidedreducedcontribu result (andinpartduetotheout-perfo participants aggressive pricing bycompetitors, agreaternumberof beerselling Zealand the market ishighlycompetitive duetothecombined effects of more While LionNathanisthe largest produ contract bottling,liquorretai beverage companies,andisalsoinvolv spirit andRTD brandsunderlicensing Lion Nathan’s beerassetsthecompa accounts forsome 15%ofgroupassetsa alcoholic beverageswithamarket share ofmore than50%.NewZealand In NewZealand,LionNathanisthecount in thejointventure. brands (i.e.InnerCircle Grey GooseandMartini.SinceOc Martini brands, including BacardiRum, BacardiBreezers, &Cola, Lion JVwasestablished tomarket, se through ajointventure withBacardiMa In additionthecompany hasexposureto Bourbon wasdevelopedinhousebyLionNathan. Inner Circlebrandisan Lion NathanownstheInnerCircle savings ofA$15million perannum envisaged. Castlemaine (Brisbane)breweriesin 20 andthesaleofalcoholbeingpermitted insupermarkets. Asa t for some 93% of themarket.
awardwinningrum acqui Rum Bourbon) andMcKenna ling andmalt extractproduction. d attheTooheys(Sydney)andXXXX
tober 2008LionNathan’scompany owned Rum andMcKennaBourbonbrands.The ny producesanddistributesanumber of s operatedunderthe“onebusiness” FY09, withcombined operatingcost s andimprove flexibility. Majorcapital ll anddistribute arangeofBacardi rmance Australianbusiness) New ofthe irits, RTDbeveragesandwine.The arrangements withinternational cer anddistributorofbeerinNew tions tototalgroupperformance in ed inotherrelatedbusinessessuchas portfolio forfuturegrowth,andgiven mponents ofitsbrewinginfrastructure rtini Ltdsetupin2003. TheBacardi nd operatingprofits.Inadditionto a range of spirits and RTD beverages a rangeofspiritsandRTDbeverages y consolidationnegativelyimpacted ry’s leadingbrewerandsupplierof e operatingenvironment, legislative red in2007,whileMcKenna have alsobeenincluded 19
79 lion nathan limited 2009 80 lion nathan limited 2009 once packaging and distribution facilities are built at the atthe new facilitiesarebuilt facility. distribution and packaging once new premises the to packaging and distribution f 74 73 77 New Zealand–spiritsandRTDbeverages 22 21 76 75 During the transition period additional costs willbe costs period additional transition the During site. from the existing account Priorproceeds the to taking into A sample ofLionNathan’sNewZealandbeerbrandsissetoutbelow: three years. sales revenuehasbeenderivedfrom ne launch ofSteinlagerPureinJuly20 has alsoincreaseditsinvestment inne New Zealandmarket, alongsidepremium Similar toAustralia, nationwide orpowe sold. Gordon’s DryGinandCampari. LionNa Red Label,CorubaRum,Smirnoff Vodka Brands currentlysoldbyLionNathan in securingagencysalesarrangements w other distributors The sizeand reachofLionNathan’sNewZealandsalesforceisunmatched by this strategyhasprovedrelati the tougheconomic conditionsinNew Z savings ofNZ$15million perannumpostthetransitionperiod. development isexpected tocostNZ$250 million state oftheartbrewingfacilities newpremises. at Thebreweryproject project, whichinvolvesthesaleof existing facilities In July2007LionNathanNewZealandannouncedtheAucklandbrewery Inbev NV(Beck’s,StellaArtois),andGrupoModeloSABdeCV(Corona). providers, includingDiagioPlc(Guiness andKilkenny),Anheuser-Busch agency arrangements withanumber of internationalalcoholicbeverage Lion Nathandistributesinternational Nationwide brands Lion Nathan – New Zealand brand portfolio Steinlager Classic Mac’s Gold Lion Red pih’ odMdl Beck’sCanterbury Waikato Draught Medal Gold Speight’s , which placesthecompany inastrongcomparative position
Premium brands Cor Steinlager Pure Stella Artois vely successfultodate. ona Extra acilities of the old premises. These costs willcease 07. Atotalof10%NewZealandnet incurred transferring the beer produced from the beer produced the transferring incurred premium andspecialtybeers based on w brandsinNewZealand,includingthe in NewZealandincludeJohnnieWalker w productsandinnovationsinthelast ith international alcohol companies. ealand thathave prevailedsince2005 r brandshavebeendevelopedinthe
than companyownedbrandsarealso , Smiffnoff RTDbeverages, Baileys, and specialtybeers.LionNathan 21 anddelivercashcost Specialty brands
Lion Brown Spei Light Ice Lion Ice and thebuildingof ght’s Summit Lager Lager Summit ght’s Draught 22
20
83 82 81 Lion NathanWine 78 New Zealand–other 80 Lion NathanInternational 79 7% and5%ofwine This isfollowedbyEurope /UK,US wine salesrevenueandis thereforethemost important destinationmarket. The Australianmarket currentlyaccount winery inOregon,USA. Marlborough regioninNewZealand. are located inSouthAustralia,Vi Smithbrook, Knappstein,Mitchelton,Stoni Wine brandsownedincludePetaluma, Wither Hills,Argyle,Tatachilla, occur. industry andtheinherentst generally highlycompetitive nature of themainstream segment of thewine systems. ByfocusingonnichefinewinesLionNathanseekstoavoidthe less price sensitivity (than lowervalue wines)and utilisefocused distribution Zealand. Thebusinessmodel focusesonpremium winebrandsthatexhibit Lion Nathanoperatesanichefinewi the leadexportbrand. the USAbeinglargest singlemarket agreements. Productsareexportedtomo (a) In additiontobeer,spiritsandwine the NewZealandoperationsinclude: Zealand. LNI operationsarebased Nathan’s beerbusinessoutsideits Lion Nathan International (LNI)is than thoseavailableonb The earningsmargins availableontheabovebusinessesaregenerallylower (c) (b)
the ContractBottlingCompany, ac use inthefoodindustry. predominantly suppliedforcraftorhome brewingandinbulkform for brands toAsia,NorthAmeri Maltexo, amalt extractbusinesswh casing more than 2,000products King OnlinewhichisNewZealand’slargestonlineliquoroutletshow Liquor King,aretailliquoroutletwi Nathan whichmanufactures forboth sales respectively. eer andalcoholproducts. ructural issues(e.g.globaloversupplyofwine)that ctoria, Western Australiaandthe home markets ofAustraliaandNew the salesandmarketing armforLion on severalexporta ca andEurope.Itsproductsare ne businessinAustraliaandNew A andNewZealandwith around10%, The companyalsoownstheArgyle s forsome 67%ofLionNathan’snet internationally andSteinlager being re than20countriesworldwide,with ontract bottlingdivision ofLion er andStHallett.Wines produced ich producesandexportsseveral th 38stores,aswellLiquor internal andexternal customers nd licencebrewing 21
81 lion nathan limited 2009 82 lion nathan limited 2009 85 Financial performance 84 87 86 venues andnationalindependentlyownedretailoutlets. business specialises inservicingon- international wines,champagnes,spirits,craftbeersandboutiquewaters.The public relationsanddistributionse Fine Wine Partners waslaunchedin2 platform services73state-based Cumulus Wine Inc,toimportitswinebr Lion Nathansubsequentlyacquiredasmall USwineimport business, which wastakenoverbyConstellati Exports toNorth America wereprevious out inSectionIVandAppendix C. Information ontherevenueandprofitabil 30 September 2008 andthesixmonths e A summary ofLionNathan’sfinancial Minority interests Minority Operating EBIT Operating Amortisation Depreciation Net sales revenue 3 The effective tax rate in FY07 of 19.8% reflects the add back of certain taxation certaintaxation add back of of tax reflectsthe rate in FY07 19.8% effective The 3 items. Beforesignificant 2 1 Net of excise and discounts. Note: Tax expense Profit before tax Net interest Significant items (pre-tax) Lion Nathan - financial performance 5 The above results other than those for the 6 months ended 31 March 2009 have been have March 2009 31 ended 6months the for those than other results above The 5 inte 25% the interest represents minority The 4 Profit after tax Operating EBITDA provisions raised in prior years and the inprioryearsand raised gain provisions audited. Lion canrecycler)not owned by and Nathan. bottler of whichwere not assessable for tax purposes).
(3)
(2) (1) (4) 454.0 472.4 507.0 307.0 1,845.6 1,967.0 2,094.2 1,185.3 - (0.1) (2) 541.1 565.4 600.3 354.7 30 Sep 06 Year to distributors throughouttheUS. (103.0) (69.6) (117.4) (69.2) A$m 2. 318 9. 245.3 390.3 351.8 329.8 2. 221 7. 176.0 272.7 282.1 226.8 rvices forpremium Australianand (25.4) (28.7) (24.7) (10.4) (61.7) (64.3) (68.6) (37.3) 8.) 109 (0.) (61.7) (108.7) (100.9) (80.4) 4.) 1.) 80 - (8.0) (19.7) (43.8) premise consumption restaurantsand on BrandsIncduringNovember 2007.
005 toprovidesales,market activation, on the sale of the Auckland brewery (both (both brewery the Auckland of sale the on performance forthethreeyearsended rest in Marine Stores (a South Australian ands intoNorthAmerica. Thisnew nded 31March2009issetoutbelow: ly distributedbyBeamWine Estates, ity of each major businessunit is set
30 Sep 07 Year to A$m
30 Sep 08 Year to A$m (0.2)
31 Mar 09 6 mths to A$m (0.1) 22
88 Lion NathanAustralia 23 89 Lion NathanNewZealand Before significant items. (b) (a) which hasbenefitedfrom: has principallybeengeneratedbythe earnings beforeinterestandtax(EBIT) As indicatedabove,LionNathanha (a) growth reflected, inter alia: significantly lowerthanthatofLionNa EBIT growthsince30September hasbeen 2006,thelevelofEBITgrowth While theLionNathanNewZealandbusin (d) (c)
the acquisitionofBoag’sin carbohydrate beers)andBarefootRadler including HahnSuperDry,Tooheys product innovation andthesuccessful introduction ofnewbrands, (iii) (ii) (i) Zealand beermarket dueto,interalia: the highly competitive operating environment that exists inthe New particularly overrecentyears. continued investment intheco premium andmid-strength beers(w improvements insales mix, asconsumers continuetomove to more advertising andtheincrease inlo significant volume growthsince
licensed forsaleinsupermarkets inNewZealand the wideravailabilityofal more aggressivecompetitor pricing combined marketshare of approximately 93%) Zealand (whereas inAustralia for approximately 10%ofthedomestic beermarket inNew the existenceofanumber ofsmaller competitors whoaccount
January 2008,whichhasachieved s consistentlyachievedrevenueand Lion NathanAustraliabusinessunit mpany’s brandsandbreweries, 23 than Australia.ThislowerEBIT acquisition following increased cations servingthebeerontap growthin recent years. Thisgrowth coholic beverages,whichare ess hasalsoexhibitedrevenueand hich generatehighermargins) New White Stag (mainstream low the two largestbrewershavea 23
83 lion nathan limited 2009 84 lion nathan limited 2009 A$300 million to A$315 million. A$315 to million A$300 to 31December2008. quarters New Zealandsubsidiary. 90 Lion NathanWine 28 27 26 25 24 92 Market guidanceforyearending30September 2009 91 This guidance represented an upgr an represented guidance This Prioritems, to includin non-recurring InNew Zealand growth inreal gross domestic product (GDP) was negative Moet Hennessy createdth their Plc acquired Pernod-RicardSA Domecq through by who now distribute Allied was The financialperformance oftheLion (b) prior year.Thisearningsguida cost impact ofhigherfourthquarterma innovation andthecontributionfrom theBo tothetimisecond halfofFY09due A$305 million toA$315million. after tax(NPAT) Lion Nathanannouncedon24April2009that distributor inJune2008. November 2007.InresponseLionNathanacquiredasmall USwine company’s distributortoConstellation Wine salestotheUSwerealsoadverselyimpacted bythesaleof consumption (whichreducesdemand forfinewines). trading downtocheaperwinesandswitchingaway from on-premise and UKforexample market conditions of excesssupplyandpricediscounting andthevagaries impacted bytheglobalfinancialcrisis, greater exposuretoeconomic conditions more volatilityrelativetothegroup’sot (c)
including the AlliedDomecq PlcspiritsandRTDbrandportfolio Moet Hennessy the lossduringperiodofanu (which hastodateprovenrelativelyresilient). impacted bytheglobalfinancialcr the weakerNewZealandeconomy whichhasbeenmore adversely eir own distributionarm. 27 fortheyearending30September 2009intherangeof
ade in expected net profit after tax from the previous guidance of guidance netprofit aftertax previous from expected the in ade 25
g costs associated with the Scheme. nce wasreiteratedon16July2009. 28 Thisreflectsahigherrateofgrowthinthe ng ofEaster,furthergainsthrough NathanWine businesshasexhibited Brands (acompeting wineproducer)in rketing spendrelating toBoag’sinthe the structuralwineindustrydynamics have deterioratedwithconsumers her businessunits,primarily duetoits mber ofdistributioncontracts, . Keywinemarkets continuetobe isis thanthe Australian economy ag’s brandsandthereversalof the itexpectstoachievenetprofit 26
of nature.IntheUS ineachofthe four 24 and 24
93 Financial position
31 March2009(unaudited)issetoutbelow: The financialpositionofLionNathan Total non-current assets Net assets attributed to Lion Nathan shareholders minorityLess assetsto net attributed interests Net assets liabilities Total Total current liabilities Provisions liabilities tax Current financialDerivative liabilities Borrowings Trade and other payables Total assets Other 7.4 Intangibles Deferred tax assets Grapevines Property, plant and equipment Derivative financial assets Equity accounted investments Inventories Receivables As at Lion Nathan - financial position Total current assets Non-current assets classified as Other Derivative financial assets Inventories Trade and other receivables Cash and cash equivalents Non-current liabilities Non-current liabilities Total non-current liabilities non-current Total Provisions liabilities tax Deferred financialDerivative liabilities Borrowings Trade and other payables held for sale as at30September 2008(audited)and
30 Sep 08 2599 2,735.0 2,559.9 2386 2,516.3 2,308.6 3,414.8 3,186.5 1792 1,938.7 1,729.2 1518 1,766.4 1,501.8 1366 1,384.9 1,376.6 877.9 898.5 898.5 877.9 577.6 579.4 626.6 679.8 679.8 626.6 313.4 279.6 296 257.0 249.6 940 984.6 934.0 125.5 96.2 96.2 125.5 459 417.0 415.9 A$m 877.5 898.0 75.7 57.8 57.8 75.7 3. 26.8 33.6 6. 61.7 60.3 11.9 11.9 11.9 11.9 34.6 35.8 35.8 34.6 10.4 7.7 7.7 10.4 1. 10.6 13.3 54.4 64.4 64.4 54.4 17.6 17.0 4. 64.0 45.3 8. 93.6 89.6 23.0 30.7 30.7 23.0 75.8 60.4 60.4 75.8 1. 119.2 13.3 1. 3.8 14.2 2. 31.5 27.1 04 (0.5) (0.4) . 8.0 5.2
31 Mar 09 A$m
6.1
25
85 lion nathan limited 2009 86 lion nathan limited 2009 94 Derivative assetsandliabilities 29 98 Non-current receivables 97 Non-current assetsclassified asheldforsale 96 95 Asat 30 September 2008the receivable was A$75.9million. derivatives areinitially exchange ratesandcommodityprices,pa or reducingexposurestoadversemove used inthe normal courseof business activitiesfor thepurpose of mitigating Lion Nathanhasseveralderivativefinanc the saleofAuckland Brewery. Non-current receivables as A$18 million) isalsolikely tobesoldaspartofanysale. meet strategicpurposes.Inaddition,inventoryatthesesites(wortharound that management expecttobesoldw plant andequipment inrelationtoAu Non-current assetsclassified asheld (b) (a) 30 September 2008toanetassetposition asat31 March2009 largelyreflects: The movement inthenet derivative pos summarised below: The netderivativepositionasat30September 2008and31March2009is remeasured to fairvalueateachreporting date. As at Lion Nathan – net derivative financial position Net derivative asset (liability) position position asset (liability) Net derivative – non-current financialDerivative liabilities current – Derivative financial liabilities Derivative financial assets – non-current Derivative financial assets – current
in interestratederivatives). interest andforeignexchangerates(w gains incrosscurrencyinterestrateswaps,drivenbymovements in in interestratesoverthelastsixmonths a declineinthevalue of interest
recognised atfairvalu at31March2009include A 29 TheAucklandBrewery wassoldin for salerepresentsgrapevines,landand ithin oneyear.Theseassetsnolonger stralian Wine GroupandWither Hills ments ininterest rates,foreign ition from anetliability position asat rate derivativesdrivenbymovements rticularly aluminium andsugar.The ial assets andliabilitieswhichare hich more thanoffsetthedecline e andaresubsequently
30 Sep 08 $78 millionrelatingto (125.5) (96.2) (96.2) (125.5) (117.4) 23.3 23.3 (117.4) A$m 1.) (7.7) (10.4) 33 119.2 13.3
. 8.0 5.2
31 Mar 09 A$m
26
99 102 101 100 Equity accountedinvestments currently underconstructi Lion Nathan hasleased back thesite untilitrelocates tothenew brewery 31 March2009. discounted at8%perannum toderive which issecured against afirst mortgage overtheproperty,hasbeen exit from thesite,whichisexpectedtobein2011.Theamount outstanding, was paid.Thebalanceof thepurchaseprice(NZ$112 million) ispayable on September 2007forNZ$162million, forwhichadepositofNZ$50million tax from theseequityaccountedinvestments wasA$7.7million. ended 30September 2008LionNathan’spro investments isreflectedintheresults Lion Nathan’spro-ratashareofthepr increased itsshareholdinginLWBon30January 2009. was approximately A$82million. Lion volume averagesharepricein weighted Creatures Brewing.Themarket capita the premium beermarket throughits Little World BeveragesLimited (LWB)islistedontheASXandfocuses were A$27.1million and A$31.5million Equity accounted investments asat30September 2008and31March2009 Nathan hasnotexitedthesitebythattime. rent-free forthefirst four during 2011atacostofapproximately Bevchain Pty Limited Pty LionAustralia Ld Heineken Bacardi Lion PtyLimited Lion Nathan – equity accounted investments Little World Beverages Limited Little WorldBeverages Limited Sale and marketing of beer.2 Sale and marketing of spirits1 and RTD beverages. Note: on inAuckland,whichisexpectedtobecompleted years, withrentapplying wholly ownedsubsidiary,Little of LionNathanAustralia.Intheyear ofitability from itsequityaccounted
aeosn n itiuin 50 Warehousing and distribution a present valueofNZ$94.5million asat lisation ofthecompany (basedonthe NZ$250million.Theleasebackis thethreemonths ended26May2009) Nathan hasannouncedthatitlast respectively andcomprise: Principal activity activity Principal -rata shareofprofitafterincome Distributor Brewery Brewery
from thefifthyearifLion (2) (2) (1) 50
Ownership interest %
40 50
27
87 lion nathan limited 2009 88 lion nathan limited 2009 103 Property, plantandequipment 104 less accumulated depreciation andimpairment andcomprise: The bookvaluesofproperty,plantande (d) (c) (b) (a) upgrade andincreasethecapacityof In recentyearsLionNathanhasincu Lion Nathan – property plant and equipment Total 934.0 Capital works in progress Plant and equipment Land and buildings
31 March2009. with some A$67million ofthisamou total capitalexpenditure inrelati annum project havebeenestimated bymanagement atNZ$15million per fully transitioned tothenewfac equipment willbeinstalled, withAucklandoperations expected tobe of calendar2009.Followingthis, Auckland. Thefirstbrewfrom thenewbreweryisexpectedbyend as statedabove,LionNathanisconstructinganewbreweryin will bealmost doublecurrent capacity the endofFY09).When complete be completed inthefirst half of FY10(withthe firstbrew expected by the newbrewhouseatBoag’sbrew expected tobegeneratedfrom thisinvestment Annualised cashsavings ofatleast A$15million perannum are gas emissions, energyusageandtradewastewillbereduced. increasing expectationsofcustom both breweries willbe increased improving flexibility tomeet 30 September 2009.Uponcompletion thecapacityandcapabilityof Queensland andNSW isexpectedtobecompleted respectively) by work toimprove theXXXXCastlemaineandTooheysbreweries(in rred significantcapitalexpenditureto its breweries.Inparticular: ility in2011.Cashsavingsfrom the on to theseprojects isA$215million quipment reflecttheiroriginalcost ers andconsumers,ers whilegreenhouse the packinganddistribution the capacity oftheBoag’sbrewery nt remaining tobespent asat ery inLauncestonisexpectedto
30 Sep 08 6. 229.0 325.3 162.1 328.7 4. 430.3 443.2 A$m
31 Mar 09 984.6 A$m
28
105 30 110 109 107 Grapevines 106 108 Intangible assets Ignoring proceeds from the sale of the As aresultoftheabovebreweryupgra generated brandsarenotrec The amount attributedtobrandsrepresen All intangibleassetsaretestedannuallyforimpairment. operating costsincurredinmaintaining is recognised intheincome statement profit andloss.Thenetmarket valueof Grapevines aremeasured atnetmarket value withanychanges recognised in amortisation. expenditure isexpectedtobebroa However, postcompletion ofthebrewery upgradesandexpansionscapital has exceeded depreciationandamortisati Intangible assetsareprimarily representedbybrandnames andcomprise: lease payments areexpensedasincurred. ercainadaotsto 8 93 87 Depreciation and amortisation 1 Excludes depositreceived ofNZ$50million 1 Note: Capital expenditure Lion Nathan – capital expenditure vers Lion Nathan – intangible assets Total 1,376.6 Other contractual arrangements Computer software Brands 998.8 335.0 Goodwill brewery site. brewery 30
Auckland brewery site, expected in FY11. ognised onthebalancesheet. 30 Sep 06 Year to A$m 3 111 93 dly consistentwith
us depreciation and amortisation during theperiodofharvest.Vineyard des andexpansions, the vines,aswell in connection with sa harvested grapes,netofpickingcosts, on inrecentyears,asshownbelow: ts acquiredbrandsonly.Internally 30Sep 07 Year to A$m
(1) depreciationand
30 Sep 08 30 Sep 08 Year to A$m A$m as anyoperating le of the Auckland 46 12.9 14.6 82 38.4 28.2 235 101
capital expenditure 3 48 93
31 Mar 09 31 Mar 09 6 mths to 1,384.9 A$m A$m 335.0 335.0 998.6
29
89 lion nathan limited 2009 90 lion nathan limited 2009 113 Net interestbearingdebt 112 Other non-currentassets 111 114 follows: Net interestbearingdebtasat closed tonewmembers andhadasu surplus inrelationtoasuperannuationplanNew Zealand.Thisfundis Other non-currentassetsrepresenta economic life and arenotamortised. All LionNathanbrandsareconsidered amount drawn,facilitylimits andma Details ofLionNathan’sloanfaci 1 The US Private Placement isUS dollar de 1 Note: asat loanfacilities 31 2009 Nathan – March Lion Lion Nathan – net in Net interestNet bearing debt Non-current borrowings Current borrowings Cash (45.3) Japanese syndicated loan US private placement Bank loans Other debt Total interest bearing debt bearing interest Total inThe difference betweentotal 4 ANZ Banking Corporation, facilitieswith Westpac Banking overnight Uncommitted 3 The Japanese Syndicated Loan is a Japanese Yen denominated2 debt. However, currency costs (A$6.9 million as at 31 March 2009). 2009). March at 31 as million (A$6.9 costs Groupand Ltd Bankof New Zealand. amount. dollar Australian aknown into the liability convert into to entered swaps been have dollar amount. or a Australian New Zealand known into the liability convert to into entered been have (3) 9.1 (1) terest bearing debtterest bearing
(2) (4) 18772 362 1,837.7 2,326.2 terest bearingdebt and borrowings relatetoissue debt 30 September 2008and31March2009wasas Amount drawn lities (at31March2009)showingthe A$m 0. 654 Feb 2010 to Aug 2015 605.4 605.4 439.5 439.5 Dec 2013 8. 1200 May 2010 to Jun 2013 1,200.0 783.7
rplus on31March2009ofA$6.1million. defined benefitsuperannuationfund turity dates issetout below: nominated debt. However, currency swaps by management tohaveanindefinite Facility Facility A$m limit 81.3
30 Sep 08 ,0. 1,766.4 1,501.8 ,1. 1,766.8 1,510.9 On Maturity date A$m 44 64.4 54.4
call
31 Mar 09 A$m (64.0)
30
117 116 115 Share capital 118 Top 10largestshareholders No optionsorotherequitysecurities Plan. accordingly noadditionalsharesareissued Share entitlements underthePlanareacquiredonmarket byLionNathan,and held bytheTrust. it isexpected thatsenior executives willbeentitled toallthesharescurrently guidance ofaA$305million toA$315 m employed byLionNathanoverthethreeyearplanperiod).Ifmarket targets aremet overathreeyearpe senior executiveshaverightstoLionNa term incentiveplanforthecompany’s seniorexecutives).UnderthePlan (the Trust)inconnectionwiththeAc 2.05 million sharesareheld by theLion NathanAchievement RightsTrust Lion Nathan currently has534.2million shareson issue.Ofthese interests asat16June2009: The followingtablesetsoutthe10larges Total shares outstanding Lion Nathan - top 10 shareholders Topshareholders 10 State Street Corporation Schroders 7,533,924 Group Fidelity Vanguard Group Westchester Capital Management Maple-Brown Abbott UBS Credit Suisse Group Investors Global Barclays Limited Company Holdings Kirin
riod (andsubjecttoalsoremaining havebeenissuedbyLionNathan. hievement RightsPlan(whichisalong- than sharesifrelevantachievement illion netprofitisachieved inFY09 t shareholdersand bythecompany asaresultofthe
Lion Nathan 4,6,2 64.8 346,068,522 246,454,275 46.1 46.1 246,454,275 3,4,9 100.0 534,240,495 19,180,076 3.6 3.6 19,180,076 55428 2.9 15,514,248 66846 3.1 16,688,486 shares 8,231,274 1.6 1.6 8,231,274 ,9,0 1.6 8,692,309 ,1,9 1.6 8,315,697 ,6,3 1.3 6,965,433 ,9,0 1.6 8,492,800 their percentage
interest % 1.4 31
91 lion nathan limited 2009 92 lion nathan limited 2009 hr rc efrac 119 performance Share price
summarised inthetablebelow: The priceof LionNathansharesfrom1January2007to30June2009is April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 2008 September 2008 August July 2008 Month 2008 June March 2008 December 2007 2007 September June 2007 March 2007 Quarter ended Lion Nathan - share price performance 2 Trading from 27 April 2009 reflected the announcement of the key offer terms. offer the key of announcement the reflected 2009 from27 April Trading 2 Monthly volumes for the1 quarter ended represent average monthly volumes. Note: June 2009 May 2009
(2) 11.84 7.64
17 1.1 16 125,624 11.62 11.61 11.75 15 1.1 15 75,544 11.57 11.41 11.59 High 9.27 8.25 9.27 37,436 37,436 9.27 8.25 28,401 9.27 9.23 33,626 9.72 7.978.55 8.20 9.40 .4 .5 .7 22,701 9.27 8.65 9.54 9.04 8.39 8.93 27,279 27,279 34,767 8.93 8.83 8.39 8.16 9.04 9.05 .7 .9 .8 36,815 8.08 7.59 8.57 32,378 8.75 27,647 8.46 8.84 9.99 8.80 9.90 .4 .9 .6 29,875 8.56 7.89 9.04 .5 .4 .9 31,839 8.79 8.24 8.90 9.65 9.75 .0 .0 .8 34,520 8.68 8.10 9.40 .9 .5 .0 26,427 8.20 7.45 8.49
$ Low Low .682 24,562 7.36 8.22 23,238 8.70 9.61
$ 11.73 89,297 Close
$ volume Monthly 000
(1)
32
121 120
qualities. Nathan’s strongfinancialperforman over theaboveperiod.Inouropinion, out-performed thebroadermarket (a As setoutinparagraph234wenotethat LionNathanshareshavesignificantly The followinggraphillustra from 1January2007to30June2009: $10.00 $11.00 $12.00 $7.00 $8.00 $9.00 a-7Ar0 u-7Ot0 a-8Ar0 u-8Ot0 a-9Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07
Share PriceHistory: Daily from June2009 to30 1 January 2007 tes themovement inLi Lion Nathan Limited Nathan Lion ce andits“defensive”investment s measured bytheS&PASX200Index) this out-performance hasreflectedLion on Nathan’sshareprice Offer from Kirin Kirin from Offer announced 33
93 lion nathan limited 2009 94 lion nathan limited 2009 Statistics (ABS). breweries,char micro Australian beermarket 122 Overview OverviewofAustra IV 34 33 32 31 125 124 andgrowth Size 123 15 year olds. Source: AC Neilson and ABS. Source: IBISWorld. Adjusted for total Australia Statisticsarebased on data thatexcludesimported Theseinclude including Woolworths Limited (Woolworths), WesfarmersLimited (Wesfarmers) and beer industries. Zealand. Thissectionth assets arerepresentedbytwocorebr While LionNathanisadiversifiedal consuming beerinsteadofwine.Ta The converseistrueforthehighwine drinking countriessuchasAustraliaare homogenisationmarkets oftheworld’sliquorwhereby the consumption ofwineandspiritsat per capitaincome andlivingstandardsha gradually reducedsincepeakingin1979. While beeristhemost popularalcoholicbeverage,beersalespercapitahave Germany andIreland. consumers ofbeerpercapitainthe increasing to2.3litrespercapita). consumption forFY09hasreducedto respectively beverages andspiritswas17.0litres, in FY08of78.2litrespercapita. Beer isAustralia’smost popularalcoholic beveragewithannualconsumption producers. Limited (CCA) jointventure (Pacific Be Brewery, Independent Distillers, th Australian beerproducersaresmall Lion Nathanaccountingforapproximately The Australianbeermarketconcentrated, withFoster’sGroupand ishighly industries
31 acterised by a production level of less than 30,000 litres of beer litres beer per annum. of 30,000 less than level of a acterised by production 33
(withtheintroductionofAlcopopstaxRTDbeverage
erefore focusesontheAu lia andNewZealandbeer 32 34 Bycomparison consumption ofwine,RTD n population as IBISWorld statistics exclude under e SABMillerPlc/Coca-Cola Amatil world, rankingbehindtheCzechRepublic, Australiansarethefourthhighest in comparison andincludeCoopers x differentialsbetweenclassesof beer. Source: AC Neilson, Australian Bureau of Bureau Neilson, Australian AC Source: beer. 14.0litresand2.1 ewing businessesinAustraliaandNew coholic beveragescompany, 90%ofits 10.1 litrespercapita consuming nationswhoareincreasingly the expenseofbeer.Anotheris favouring wineattheexpenseofbeer. verages) andanumber ofothermicro ve precipitatedamarked increasein Oneexplanationisthatincreased 93%ofindustryvolume. Other stralian andNewZealand traditional heavybeer litres percapita , withspirits
34
than double the next highest country the United Kingdom. 127 126 36 35 Data on RTD beverages is not available. Australia has the highest consumption per capita of RTD beverages in the world, consuming more for thetenyearsto30June2007. The graphbelow setsout theper capita consumption ofbeer,wineandspirits this period,withotheralcoho of wholesalebeersoldinAustralia 10% perannum overthepastfiveyears. Australian retailliquormarket has past fiveyears.AccordingtotheAu to 30June2008(FY08),exhibitingco The Australianwholesalebeerindustry 30 June2008isshowninthegraphbelow: Australian wholesalebeer salesand consumption percapitaforthe10yearsto such asRTDbeverageshavealsore alcoholic beverages,togetherwithgrowth $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 100 110 120 130 140 80 90 Source: IBISWorld Source: Source: Lion Nathan. 69 79 89 90 00 10 20 30 40 50 06-07 05-06 04-05 03-04 02-03 01-02 00-01 99-00 98-99 97-98 96-97 89 90 00 10 20 30 40 50 60 07-08 06-07 05-06 04-05 03-04 02-03 01-02 00-01 99-00 98-99 Beer Wine Australian Wholesale Beer Sales: Total Market and Per Total Capita BeerSales: Wholesale Australian Spirits (LHS) sales $billion Beer Australian bevera
Relative Growth: From years ended: 30 June 1999 to 2008 to 1999 June 30 From yearsended: lic beveragespickingupbeer’slostmarket share. 36 grown atacompoundannualrateofover
has notincreasedbythesame levelover g duced consumer preference forbeer. e consumption per capita stralian Bureau of Statistics (ABS)the
Indexed from 1996-97 mpound annualgrowthof5%overthe turned overA$5.8billionintheyear Per capital per consumption - Litresper consumed (RHS) capital Per However,asshownabovethevalue ofrelativelynewalcoholicproducts 35 litres per per litres capita
0 10 20 30 40 50 60 70 80 90 100
35
95 lion nathan limited 2009 96 lion nathan limited 2009 129 128 Industry trends 37 130 131 132 The low-carb beer segment may be small but is currently growing by in excess of 100% per annum. following table: Australian salesofbeerbyproducttype outgrown thetotalbeermarket. consistent with industryexperienceov category, withbrandssuchasCorona,He Australian beermarket. Foreignimporte growing atover10%forthelastfive the trendtowardshighervalue,premium b With Australians consuming lessbeer, (c) (b) (a) Other industrytrendsinclude: innovation andmarketing. Asaresult population, thehealthandlifestylebenefits ofcertain productsandindustry Key driversofchangingconsumpti Dry 3.5(low-carb,mid-strength) intr strength beer)in1991,Hahn SuperDr introduced in2005.Similarly,LionNa mid-strength beer)launchedin2007a New brandslaunchedbyFoster’sGroup boutiques offering more thantheaveragerangeofbrew. creative names aregainingpopularity, Segment Beer segmentation, byproduct type and alcohol strength ih 3 1. 1. 95 . 7.3 8.5 9.5 10.6 11.8 Source: 2 12 months to April. Alcohol by volume. <3% 1 Note: Light 3%-4% 16.9 17.5 18.4 18.8 19.0 Mid 63.3 63.0 61.9 62.2 61.5 >4% Full 8.9 10.2 10.6 12.1 Premium 8.0 >4%
Market share share Market IBISWorld believes currentlyaccounts for2.4%ofindustryrevenue. the growthoflow-carbohydrate(l preferring different,preferablybott beer drinkersbecoming moreselect a preferenceformid strengthbeerat
AC Nielson. ABV (1)
Apr 05 % (2)
Apr 06 on includedemographics,anaging yearsandnowaccountfor12%ofthe oduced inMarch2009. Whilst the % nd PureBlonde(alow-carbbeer) y (low-carb)in2006and HahnSuper erseas, wherepremium brandshave as tooarethenewtrendybeer bottled beerswithfunkylabelsand industry revenuehasbeensupportedby than launchedXXXXGold(amid- andalcoholconten d beershaveledth have includedFoster’sVBGold(a (2) ineken, GrolshandBeck’s.Thisis eers. Premium beersaleshave been led beersforcertainoccasions
ive intheirbeer preferences and the expenseoffullandlightbeer ow-carb) beersegment, which Apr 07 % (2)
Apr 08 t areshowninthe e growthinthis % (2)
Apr 09 % (2)
37 36
133 Competition andmarketshare 38 137 Customers 136 135 134 However this includes sales from the JBoag &Son business purchased at the beginning of 2008. share inexcessof93%the relatively stablesince2003,withFost The market sharefortheAustralianbeerindustrybyvolume hasbeen this innovationisrequiredasconsumer demand fornewproductsishigh. continuous flow ofnewbrandshasa format (suchasDanMurphy’s and1 acquisitions, aswellinnovationssuch 32% justfiveyearsago. Thisgrowth beverages market,controlli Woolworths andWesfarmers exertsignificantbuyingpowerinthealcoholic volume) ofapproximately 1%. at thedate of thisreport Pacific to supersedeCoopersasthenumber thr currently the number four recently Bluetongue, whichwasacquired in2007. PacificBeveragesis Nastro Azzurro, MillerGe Cola Amatil Limited. Thejoint vent Pacific Beverageswasformed in Wesfarmers Limited (Wesfarmers). as theprivatelabelbrandssoldby Brewery, PacificBeverages,Independent As notedearliertheremainder ofthe 5.5% of salesrevenuegrowth,recording Nathan’s beerdivisionhasbeenable While volume marketshareshave Market share byvolume Market inNta 4. 4. 4. 4. 4. 43.0 43.2 43.0 43.3 Source: 43.7 Includes both Boag’s and 1Heineken as if they had been owned by Lion Nathan from Note: 42.7 Other 3.6 Lion Nathan 4.1 Foster’s 53.7 52.2 4.7 52.0 5.1 51.9 50.9 5.9 50.3 6.7 2003. 2003. 38
forthefiveyearsto2008compared AC Nielson. Apr 04 % (1)
Apr 05 player intheAustralianbeermarket andhasplans nuine DraftandPilsnerUr ng 54%ofAustralianliquorretailsales,upfrom % total market, asshownbelow: Beverages onlyhadamarket share(by (1) August 2006bySABMillerPlcandCoca-
Woolworths Limited and (Woolworths) remained relativelyunchanged,Lion compound annualgrowthrate(CAGR)of Apr 06 ure distributesbeersincludingPeroni st cannibalising effect to out-perform Foster’sGroupinterms market issharedbetweenCoopers hasbeendrivenbystore andchain Choice).The latterhas beentothe er’s andLionNathanmaintaining a ee Australianbeerproducer.However % astherollout ofthebigboxstore Distillers andmicro brewers,aswell (1) to Foster’sGroup’srateof3.3%.
Apr 07 % quell, Grolsh,andmore (1)
on existingbrands, Apr 08 % (1)
Apr 09 % 37
97 lion nathan limited 2009 98 lion nathan limited 2009 139 Major brands 138 40 39 140 Excise taxes There has been speculation that the WET may be re However this market segment has grown over 160% since mid 2006. Source: AC Nielson. Toohey’s ExtraDry,asset in orderofmarket shareareXXXXGo currently representssome consumer preferenceshaveerodedVictoria Bitter’smarket share,which 1990’s hadsales asmuch asthreetimesitsnearest competitor. Changing Australia’s mostpopularbeerisVictoriaBitter,whic 1.2% oftheoverallmarket. market. The Australianprivatebeer Woolworths andWesfarmers havealsorecently enteredtheprivatelabelbeer disadvantage compared totheirlargerrivals. private label strategies is to themajor beerproducersandth detriment ofindependentliquorreta between wineandbeer. prices andexcisetaxesincrease with th not changedsinceitwasintroducedin2000.AstheWET rateincreaseswith relative totaxationonwine.This whereby anincrease intheCPIwill Excise onbeerandspiritsisindexed constituting almost half theretailprice of Taxation hasasignificantimpact (WET), whichisfixedat29%ofwholesalesales value. February andAugust.Conversely,thetax Tooheys Old Black Ale Source: AC Nielson. Carlton Premium Dry Carlton Strength Mid Hahn Premium Light Tooheys Extra Dry Extra Tooheys West EndDraught Cascade Premium Cascade Coopers Pale Ale Pale Coopers Melbourne Bitter Carlton Draught Hahn Super Dry Victoria Bitter Tooheys New Tooheys XXXX B XXXX Corona Extra Crown Lager Crown Carlton Cold XXXX GoldXXXX Pure Blonde Gold Bitter itter Australianto April beersales: 2009 Year
toimprove profitability. 16% ofthemarket. Thenexthighestsellingbrands 39 out inthetablebelow: Liquorretailer’smargins arelowincomparison upon theliquorindustry,withtaxes erefore akeymotivationforpursuing adjustment occursbiannually,every ilers, whoareatacompetitive increase taxation onbeer andspirits label segment is small and represents to theconsumer priceindex (CPI), placed at some stage with a volumetric wine tax. ld, TooheysNew,CarltonDraughtand e CPIthere isalso atax differential packagedbeerinlowerpriceranges. on wineistheequalisationtax
h atonestageinthemid 40 TheWETratehas
38
141 143 142 including RTDbeverages,asat The tablebelowprovidesthedifferentex introduction, priceconscious consumer classes prior totheannouncement oftheAlcopopsTax.However sinceits Sales ofRTDproductssignificantly out-p substituted RTDbeveragesforotheralcohol significantly sincetheintroductionof Federal Government data,consumption ofRTDbeverageshasfallen increase ofapproximately $20percase been labelledthe‘alcopops a loopholecreatedwhentheGSTwasin beverages by70%tobringthem intolin In April2008theAustralianFederalG -40% -30% -20% -10% 10% 20% 30% Source: Excise rates on alcoholic beverages Alcohol Beer ihsrnt te . 3.6 40.82 35.03 39.36 40.82 33.77 39.36 >3.5 6.99 28.74 3% - 3.5 <3 21.96 High strength - other 27.70 6.74 21.17 Mid strength - other >3.5% Low strength - other 3%-3.5 <3 High strength – draught Midstrength –draught Low strength – draught Spirits (excluding brandy) > 10 66.67 69.16 $ litreofalcohol $ per 69.16 66.67 Wine cask (WET) (WET) bottle Wine >10 RTD beverages Spirits (excluding brandy) 0% Source: Federal Government Budget 2009-10 Paper 1. Paper 2009-10 Government Budget Federal Source: 2005-06 Federal Government Budget 2009-10 Paper 1. Beer 2006-07 Australian weekly average beer and spirits clearances Percentage change: 11monthsfrom May - March 2007-08 Alcohol by by Alcohol
’ tax(AlcopopsTax)andisequivalenttoan volume ≤ % 10 39.36 69.16 $ litreofalcohol $ per 69.16 39.36 10 9 29% 29% 29% 29% February2008and2009:
2008-09
Spirits (excl. RTDs) theAlcopopsTax,asconsumers
1 Feb 08 overnment increasedtheexciseonRTD ofRTDbeverages.Accordingto s haveswappedRTDbeverages (down Excise rates as at e withunmixed spiritstherebyclosing troduced in2000.Therelatedtaxhas cise ratesonbeer,wineandspirits, erformed otheralcoholicbeverages
ic beverages,asindicatedbelow:
2 Feb 09
29% ofwholesale RTDs sales value of alcohol $ per litre per $ of 1.15% 1.15% of in excess Notes
39
99 lion nathan limited 2009 100 lion nathan limited 2009 144 Outlook 41 148 beermarket Zealand New 147 146 145
This has not occurred to to date. not occurred This has towards traditional brands (inabid to savemoney) IBISWorld, includingareversalofth financial crisis.However,some change Consequently beersalesarenotlikely Beer, consistentwithmost alcoholic taxes canhaveonthealcoholicbeveragesindustry. 18% and4.7% involume terms). Thisillustrates theimpact changestoexcise 35% involume terms) forcheaperaltern exhibits similar trendstothosein 90% oftheindustry.In terms ofove concentrated withLionNathanandDB Similar tothe Australianmarket, theNewZealandbeermarket ishighly (d) (c) (b) (a) Major risksfacingbeerindus bars isalsolikelyto beers may partlyreversethistrend. at thecontinuedexpenseoftapbeer Beer drinkers arelikely tocontinue to demand awiderrange of bottledbeers underway) may recommend changesto impact beervolumes anditispossible excise taxchangesforbeerandotheralcoholicbeveragesarealsolikelyto classes ofalcoholicbeveragessuchas intensify, beer’smain sourceofcompet and companies suchasCoopersBrewery While competition from themajor Australian retailer’s private label brands consumers optforbeeroverthehigh
market. market. the entryof asubstantial international brewerinto theAustralian alcoholic beveragecompanies Holdings Ltd,whohavebothrece an aggressivepricebasedentryof to increasetheirmargins attheexpense ofbeerproducers Woolworths andWesfarmers exerting market share the threatofdiscountingbyindustr encouragethistrend.
try participantsinclude: Australia, however there are some are there however Australia, s, althoughmoves toaddpremium tap beveragesisadefensiveproduct. The popularityoftrendyboutiquebeer er pricedspiritsandRTDdrinks. rall trends, the New Zealand market trends,the NewZealand rall e previouspremium beertrendback wineandRTDbeverages.Further, to beheavilyimpacted bytheglobal that theHenryTaxReview(currently Breweriesrepresentingapproximately ition isexpectedtobefrom other s toindustrytrendsareexpectedby beer excisetaxesortheWET. atives such asspiritsandbeer(up AsahiBreweriesLtdorSuntory ntly purchasedAustraliannon- and PacificBeveragesisexpectedto y participantsseekingadditional their market powerinanattempt 41 andaliftinbeersalesas 40
149 Size andgrowth 150 42 151 Based on total available for consumption in New Zealand for 2008. Source: Statistics NewZealand.
On aworldrankingNewZealandersarethe16 are explained below. Since 1997beervolumes inNewZeala significant structuraldiffere choosing morewineandspiritbaseddrinks,asshowninthefollowingchart: primary reasonforthisreductionisalcoholsubstitution,withconsumers of totalalcoholicbeveragesconsumed, far themost popularalcoholicbeverage While beerconsumption percapitahas exceptionally longandhotNewZealandsummer. per capita increased by2.3%. Thisisattributabletogrowthfrom an However, in2008volumesrose3.3% to322.5million litresand consumption level, withpopulationincreasesoffset 90.5 litrespercapitain1996,asshownbelow: lower thanAustralianconsumption pe nation percapita,consuming 75.5litresperperson in2008.Thisissome 4% Millions 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 Source: StatisticsSource: New Zealand Total beer availableTotal for consumption: hectolitres (LHS) 9619 9819 0020 0220 0420 0620 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 New Zealand beer available for consumption trends consumption for beeravailable Zealand New
nces, whichtogetherwithabriefmarket overview, Population (LHS) ting decliningconsumptionpercapita. r capita(perannum) andisdownfrom 42 nd haveremained ataroundthesame decreased overtime itstillremains by inNewZealand,representing66.3% downfrom84.2%in1992.The th highestbeerconsuming Beer available for consumption per capita: litres (RHS) 0 10 20 30 40 50 60 70 80 90 100
41 Litres per capita
101
lion nathan limited 2009 102 lion nathan limited 2009 Heineken NV. 153 De-regulation andcompetition 152 44 43 156 155 154 DB Breweries is 100% owned by Asia Pacifi inAustralia. by allowed supermarkets arestill not alcohol Sales of
supermarkets tosellalcoholforthefirsttime. De-regulation oftheNewZealandliquorindustryin1999allowed been duetothedevelopment ofRTDbeverages. of 3.0%and15.3%perannum. Muchof of 42.6%and449.2%respectively,equati Since 1996wineandspiritbaseddrinks 19.4% and14.3%oftheNewZealandal Wine andspirits (andspiritbasedproduc New Zealand,withpremium beeraccountingfor 37% ofthemarket in2008, The trendtowardspremium andlow- over thesameperiod. since 1999.Incomparison thepriceofon-premise beerhasincreased11% factors hasresultedina A combination oftheimpactsupe Australia. prices significantly lowerthancomp DB BrewerieshasbeensellingHeinek by DBBreweries Another factorpresentin since de-regulationofthemarket. alcohol andoverallcompetitivenessof on-premise sales.Inadditionthenumber level. Asaresult,salesfrom off-prem dynamics asitledtosignificantlymore M litresM 100 150 200 250 300 350 50 0 Source: 9619 9819 0020 0220 0420 0620 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Statistics NewZealand 44 inanattempt togainmarket share.Forexample,
Total Alcohol Consumed Zealandin New 6% reductionintherealpr Beer volumes the NewZealandmarket isthelevelofdiscounting c Breweries Limited whic c BreweriesLimited 1996 to 2008 Wine volumes arable Heinekensellingprices in rmarkets, discountingandotherminor carb beerisalsoprevalent in ise sourcesincreasedattheexpenseof en brandedbeersinNew Zealandat alcoholic beverageshaveallincreased competition attheoff-premise retail have experiencedgrowthinvolumes coholic beveragemarket in2008. ts likeRTD beverages)accountedfor ofalcohollicenses, the growthinspiritbaseddrinkshas ng tocompound annualgrowthrates 43 Spirit volumes Spirit Thischangedindustry ice ofoff-premise beer h is 42.5% owned by by owned h is42.5% availabilityof
42
157 Outlook 159 158 when itwasreleasedinDecember 2007. Export 33whichbecame oneofthecompany’s best-sellingnew releasebeers brands suchasMac’sSpringTide. Low-carb beersarealsobecoming increas with thesuccessfullaunchof additives andpreservativessegment”, through discountingasdiscussedabove.A structure oftheindustry,wherebypremiu based beers,whichispartlyduetodemographics andpartlyduetothe up from 13%in1999.NewZealandersdr market. market. sales, nowhold significantbuyingpower Supermarkets, whichrepresentsome 30% discounting from andsmaller DBBreweries Competition inNewZealandisexpe production anddistribution. New Zealand,highlightingthedefens conditions, in2008consumption ofal challenging operatingenvironment than New Zealandhasfeltthe effectsmore se shielded thecountryfromfulleff In Australia continuing commodities demand from Chinahassomewhat SteinlagerPurein2007. DB Breweriessubsequentlylaunched cted toremain tough,withprice ect oftheglobalfinancialcrisis. ive qualitiesofalcoholbeverage coholic beveragesincreasedin which LionNathanhascapitalisedon Australia.Notwithstandingthese verely andiscurrentlyfacingamore m beersaleshavebeenencouraged in whatisalreadyaverycompetitive ingly popular, ledby successfulbeer ink ahigherpercentageofpremium nother growthareaisthe“freefrom of allalcoholsalesand22%beer participants expectedtocontinue. 43
103
lion nathan limited 2009 104 lion nathan limited 2009 163 162 161 160 V Valuation approach
and thoseconsidered comparable. Whenvaluingcontrollinginterests ina differing profilesandgrowth prospect multiples derived from thesesources needtobereviewed inthecontext of the guidance astovalueand from precedent stock market tradinginshares incomparablecompanieswhichprovidesome appropriate multipletobe appliedto (EBITA), earningsbeforeinterestand and amortisation (EBITDA),earningsbefore interest,taxandamortisation maintainable operatingcashflow,earnings Capitalisation multiples canbeappliedtoeitherestimates of future a significantchangeingrowthprospectsandrisksthefuture. where abusinessisinstart-upphase,has steady growth prospects.Suchame proven trackrecordandexp this applies incircumstances whereth earnings stream canbeestablishedwith commonly appliedwhenvaluingbusinesseswhereafuture“maintainable” Methodologies usingcapitalisationmultip reflects therisksassociated at theNPVfuturecashflowsarediscountedusingadiscountratewhich the estimated futurecash flowsincludinga Under theDCFmethodology thevalueofth (e) (d) (c) (b) (a) prospectuses. Theseinclude: selective capital reductions, schemes ofarrangement, takeoversand or securitiesforthepurposesof,am appropriate methodologies thatavaluer ASIC RegulatoryGuide111“Content ofExpert’s Reports”outlines the
or assetsasabasisforvaluation any recent genuine offersreceivedby thetargetfor anybusiness units reflect theirvalueona100% market andallowingforthefactth the quotedpriceoflistedsecurities an orderlyrealisationofassets the amount thatwouldbeavailablefo company, added totheestimated realis the estimated future maintainable earnings orcash flows of the industries inwhichthecompanyits profitcentresareengaged,to or the application of earnings multiples appropriate tothebusinesses or the discountedcashflow(DCF)methodology with thecashflowstream. ectations offutureprofita ongst otherthings,sharebuy-backs, thodology isgenerallynotapplicable thodology such earnings isusually derivedfrom controlling interestbasis e businessisrelativelymature, hasa s betweenthecompany beingvalued tax (EBIT)ornetprofitaftertax.The adegreeofconfidence.Generally, of thosebusinessunitsorassets. should considerwhenvaluingassets transactions withintheindustry. The les ofearningsor cashflowsare at thequotedmarket pricemay not , whenthereisaliquidandactive beforeinterest,taxdepreciation finite life,oris terminal value.Inordertoarrive e businessisequaltotheNPVof r distributionto able valueofanysurplusassets bility andhasrelatively likely toexperience shareholders in 44
167 166 165 Methodologies selected 164 168 business anadjustment isalsorequired capitalisation ofearnings Consequently, inouropinion,itisappropr (c) (b) (a) Further thebusiness: We notethatlong-term cashflowforecasts forLion Nathanarenotavailable. surplus assetsanddeductingnetborrowings. value ofthebusinessoperations,together The market valueofLionNathanhasbeenassessedbyaggregatingthemarket time, costandtaxationconsequences methodology, thevalueofnetassets of thecompany areadjustedforthe realisation ofassetsand be appliedwhereabusinessisnolonger capitalisation ofearnings An assetbasedmethodology isapplicable company. added tothevalueofbusinessinor estimate of themaintainable earnings andthevalue of suchassetsisseparately The earningsfrom anynon-tradingorsu maintainable EBITDA.Thismethod is capitalisation ofEBITa The resultingvalueshavealsobeen evidence, which isgenerallyquotedinEBITDAterms. methods.
has expectationsofongoingprofitability. operates primarily inthe(m is longestablished nd netprofitaftertax(o distribution oftheproceeds methodology. We havetheref nor aDCFmethodology isappropriate.Itcanalso ature) beerindustry;and cross-checked byreferencetothe of realisingthecompany’s assets. der toderive thetotal valueof the to incorporate apremium forcontrol. also consistentw agoingconcernorwhereanorderly rplus assetsareexcludedfrom the withthe realisable value of any incircumstances whereneithera iate tovalueLionNathanusingthe r priceearnings (PE)) isproposed.Usingthis ore capitalisedfuture ith thetransaction 45
105
lion nathan limited 2009 106 lion nathan limited 2009 170 171 169 Valuation methodology Valuationof100%LionNathan VI 46 45 174 173 172 Assessment ofnormalised EBITDA million respectively. on 9 broker reports released from 24March 2009 to 23 July 2009) were A$324 million and $348 Before significant items. The median broker forecasts for ne realisable value of surplu The valueofthesharesinLionNath non-recurring items) iscapitalised atanappropriate EBITDAmultiple. as ourprimaryvaluationmethod. Un capitalisation of EBIT and netpr capitalisation ofEBITand The resultingvalueshavealsobeen debt. As statedinSectionVwehavea ended 31March2009issummarisedbelow: business unit)forthethreeyearsende A summary ofLionNathan’snetsa nature inherentlyuncertain.Whilst they and FY11haveyettobeendorsedby FY09 ofA$300million to A$315million. previous earningsguidancefornetprof business unit)havebeenre Management’s FY09forecastandintern environment andprospectswithLionNathanmanagement. have discussed eachbusiness unit’sfinancialperformance, operating have hadregard tothehistoricaland In ordertoassesstheappr we notethattheyarenotinconsis Net sales revenue Results for the 3 years ended 30 September 2008 and 6months to 31 March 2009 New Zealand Australia Corporate 2.1 Wine (pre SGARA) Total (3) (1)
t profitaftertax (pre significant s andotherassetsdeduc opriate level of EBITDAforvaluationpurposeswe viewed. On16July2009LionNathanreiteratedits 30 Sep 06 Year to 1,845.6 1,967.0 2,094.2 1,185.3 ,0. ,8. ,3. 832.0 1,201.5 1,287.0 1,431.8 ofit aftertax(orPE)methods. dopted thecapitalisati tent withcurrentbrokerforecasts A$m 493.2 514.0 487.2 269.9 4. 160 7. 83.4 175.2 166.0 148.8 cross-checked byreferencetothe les revenueandoperatingEBITDA an isthenderivedbyaddingthenet forecast results ofeachbusiness unit, and
der thismethod theEBITDA(before d 30September2008andthesixmonths Lion Nathan’sBoardandarebytheir it after tax (presignificant items) for al projections forFY10andFY11(by have notbeensetou The internalprojections forFY10 30 Sep 07 Year to A$m - items) inFY10and FY11 (based ting netinterestbearing on of EBITDA method on ofEBITDAmethod 30 Sep 08 Year to A$m - t inthis report 45 31 Mar 09 6 mths to . A$m 46 (by - 46
47 176 175 Adjusted torecognise the average earning (c) (b) (a) Lion NathanAustralia 30 September 2009 likely operatingEBITDA(beforenon-recurr For valuationpurposeswehavecapita business units)arediscussedinparagraphs 86to91andinAppendixC. performance (andthekeyfactorsimpac due totheperformance ofLionNathanAustralia.Thereasonsforthis As indicatedabovethegrowthinEBITDArecentyearshaslargelybeen Total Corporate SGARA Wine (pre SGARA) Operating EBITDA Results for the 3 years ended 30 September 2008 and 6months to 31 March 2009 in isshown Zealand New Lion Nathan EBITDA for operating and sales revenue Net 3 items. and one off Beforesignificant 2 discounts. and excise of Net 1 Note: New Zealand Australia
New Zealand dollars in Appendix C. 12.9% inthesixmonths to31March2009) significant increase inFY09 opera and theincreased contribution from Bo upgrade andexpandtheCastlemaine, TooheysandBoag’s breweries to more premium beers),thecontributionfrom investments made to continued improvementsinsalesmix (asconsumers continuetomove higher salesandprofitmargins significantly greaterinvestment in through theLionNathandistributi increased significantly,refl since acquisitiontheoperatingEBIT was acquiredinJanuary2008) recent years, withoutincluding thecontribution from Boag’s(which Lion NathanAustraliahasconsiste (3) 98.2 (2) 47
. Informing ouropinionwenotethat:
s of thes of wine business over recentyears.
30 Sep 06 Year to A$m 541.1 565.4 600.3 354.7 452.6 468.4 507.3 313.3 (23.4) (26.3) (30.0) (21.7) ecting (interalia)the 61 97 23 7.2 22.3 19.7 16.1 (2.4) (2.8) 0.3 (0.7)
lised our estimate ofLionNathan’s ting ontheperformance oftheother on system (sinceJuly2008)and ting EBITDA(whichincreased the brand,whichhasresultedin ntly increasedoperatingEBITDA in 30 Sep 07 DA contributionfrom Boag’shas ing items) fortheyearending Year to A$m 106.4 ag’s areallexpectedtodrivea 30 Sep 08 distribution ofBoag’s Year to A$m 100.4 31 Mar 09 6 mths to A$m 56.6 47
107
lion nathan limited 2009 108 lion nathan limited 2009 48 In the six months ended 31 March 2009 the minority interest in profit was A$0.1 million. million. wasA$0.1 in profit interest the minority 2009 31 March ended months six the In (k) (j) (i) (h) Lion NathanWine (g) (f) Lion NathanNewZealand (e) (d)
the FY08resultsofLionNathan months to31March2009 30 September 2009isexpectedtoexceedtheperformance inthesix the operatingEBITDAofwinebusinessinsixmonths to (which hasreduceddemandforfinewines) cheaper winesandswitchedawayfrom on-premiseconsumption in theUSandUKparticular,consumers havetradeddownto dynamics ofexcesssupplyandpricediscounting impact oftheglobalfinancialcrisis 31 March2009. Thisreflecteddifficultmarket conditionsdue tothe operating EBITDA fellsignificantlyinthesixmonthsto 31 March2009fell4.2% operating EBITDA (inNewZealanddo environment thatexists intheNewZealandbeermarket ended 31March 2009)andthehighly competitive operating reported negativerealreductionsin This hasreflectedtheweakNewZealandeconomy(which dollars (referAppendixC)hasnotgr NewZealand Lion NathanNewZealand’soperatingEBITDAin when assessingEBITDAforvaluati purposes asthesharesin LWB havebeenvalued separately) (and hasbeenbackedoutwhenassessingEBITDAforvaluation World BeveragesLimited (LWB) isincludedinoperatingEBITDA the profitcontributionfrom LionNath Nathan acquiredasmall USwinedistributor competitor inNovember 2007.Subsequently(inJune2008)Lion impacted bytheacquisition oftheco recycler the minority interest held ina 48
South Australianbottleandcan andthestructuralwineindustry GDP ineachofthefivequarters Wine businesswereadversely on purposeswehaveallowedfor mpany’s distributorintheUSbya own significantlyinrecentyears. an’s 40%investment inLittle llars) inthesixmonths ended 48
be higher if the non-recurring corporate costs were added back. 30 September 2009 and recognises the average earn 51 50 49 179 178 177 Acquired in January 2008. It should be noted that the growth rate of 7% achieved in the six months ended 31 March 2009 would EBITDA operating the end our likely year ending of estimatefor the isatthe of high This (m) Unallocated corporatecosts (l) marketing spendrelating toBoag’sintheprior year. Boag’s brands timing furthergainsthroug ofEaster, growth inthesecondhalf announcement on24April2009thatitexpe Our adoptedoperatingEBITDA isthereforeconsistentwithLion Nathan’s operating EBITDA achievedinthesixmonths ended31March2009. year ended30September 2008andco This representsa10.8%increaseon purposes ofA$665million. adopted operatingEBITDA(beforenon Based ontheabove(anddiscussionsw (o) (n)
on-going corporatecosts(at were A$21.7million. This represen in thesixmonthsended31March2009 Lion Nathan’scorporate costs expenditure) ofthewinebusiness impacts, whichbetterreflectsthecash generated(beforecapital assessed theoperatingEBITDA oftheWine Business priortoSGARA wehave been ignoredwhenassessingEBITDA.Consequently, SGARAs (andareimpacted bychanges as SGARAadjustments represent no A$32 million. costs areexcluded(whichisapprop treated assuchinthefigures while theabove costsareclearlyof (ii) (i) the increase incorporatecostswasprimarily dueto: 31 March2008 over thelevelofcorporatecosts
51 office duringthesixmonth period costs associated withLion Nathan’smovetoanewcorporate Limited (CCA)(whichdidnotproceed);and costs related totheproposed merger withCoca-Cola Amatil andthereversalofcostimpact ofhigherfourthquarter
ofFY09(compared tothefirsthalf)due 49
ings of the wine business over recent years. years. recent over business ings ofthe wine the EBITDAlevel)arearound the operating EBITDA achieved inthe the operatingEBITDAachieved h innovation,thecontributionof mpares withthe7%increasein paragraph174.However,oncethese ith LionNathanmanagement) wehave -recurring items) forvaluation incurred inthesixmonths ended riate given their a non-recurringnatu ted anincreaseofA$5.1million cts toachieveahigherrateof n-cash movements inthevalueof in grapepricesetc)theyhave nature) annualised re they arenot 50
49
109
lion nathan limited 2009 110 lion nathan limited 2009 brokers appearto have added back
181 EBITDA multiple 180 52 Based on nine broker reports released from 24 March 2009 to 23 July 2009. We note that not allthe that not note 2009. We July to 23 March from2009 24 released reports broker Based on nine (m) (l) (k) (j) (i) (h) (g) (f) (e) (d) (c) (b) (a) including, butnotlimited to: judgement but normally involvescons The selection of theappropriate EBITDA multiple toapply isa matter of broker estimates which rangedfrom We alsonotethatouradoptedoperati FY09 EBITDA).
earnings. whether the assessment isconsistent the extentto whichapremium for controlisappropriate quality oftheassets the assetbackingofunderlyingbusinesscompany andthe expected changes ininterestrates the cyclicalnatureofindustry entry, etc the industry inwhichitisengaged, the futureprospectsofbusine sectors involved insimilar activitiesore the multiples thathave been paidinrecentacquisitions ofbusinesses sectors involved insimilar activitiesore the multiples attributed bysharemark the financialstructureofcompany andgearinglevel the spreadandfinancia the natureandsizeofbusiness the qualityofmanagement andth the stabilityandqualityofearnings 52
allnon-recurring corporate cost
l standingofcustomers A$644million toA$678million (for ng EBITDAisbroadlyconsistentwith ideration of a number offactors xposed tothesame broadindustry xposed tothesame broadindustry ss includingthegrow strength ofcompetitors,barriers to withhistoricalandprospective e likelycontinuityofmanagement et investors tolistedcompanies s when derivingtheirforecasts. th potential of 50
historical EBITDA multiples. EBITDA multiples. historical companies set out in Appendix F. As such the range, simple average and median are based on 184 183 Listed companymultiples 182 53 Consensus forecastEBITDA multiples forthe wine multiples below arebased oneachcompanies’ consensus broker forecasts: with ourestimate of thelikelyle As thelevelofoperatingEBITDAadopted out inAppendicesDandF. beverages sectorandselect The EBITDAmultiples for listedcomp appropriate EBITDAmultiple range for LionNathan. We discussbelowspecific factorstaken Simple average Range Wine companies: Median 8.3 Simple average Range companies:International beer Lion Nathan Limited AmatilCoca-Cola Limited Foster’s GroupLimited Australian beverage companies: Trading company multiples Median 8.8 Theseare historical EBITDA multiples as 3 Basedmonth1 on volumeweighted average price (VWAP)Lion of Nathanshares up 2 Based on listed market prices as at 9 June 2009 (except Lion Nathan) and earnings 1 Note:
by Kirin) and the net debt position as reported as at 31 March 2009. approach the initial takeover halt following the trading to (i.e. 22 April 2009 prior to forecasts. the chosen wine companies.
ed international beer andwine companiesareset
vel ofoperatingEBITDAinFY09the companies are onlyavailable forthree ofthe anies operating inthe Australian limited forecast information is available for is forecast information available limited into consideration when assessing the for valuationpurposesisconsistent multiple EBITDA 5.0 –22.2 6.6 –10.9 Forecast 10.4
8.5 9.3 9.0 8.7 8.7
(2) (3) (3)
(1)
53 (3)
51
111
lion nathan limited 2009 112 lion nathan limited 2009 186 Transaction evidence 185 187 acquisitions of controlling interests) is shown below: multiples impliedbythese transactions transactions inthebeerandwine As setoutinAppendicesEandGth the level ofdebtfunding employed ineachcompany. EBITDA multiple orenterprisevalue le takeover). Thisbroadlytranslates 35% (assuming thepre-bidmarket pricedoesnotreflectanyspeculationofthe market price insuccessful takeovers The abovemultiplesarebasedontheliste implied bytheabovetransactionevidenceforwinesector. Consequently, inouropinion,littlerelia generally was substantiallybetterthan market conditionsandoccurredwhen above arerelativelyold (i.e.pre-Ap It shouldbenotedthatthelargemajo undertaken byLEAindicates shares (andthereforeexcludeapremium forcontrol).Empirical evidence Median Simple average High 25.1 Low 4.9 company transaction evidence:Wine Median Simple average High 18.2 Low 8.6 Beer companytransaction evidence: Transaction multiples Transaction
that theaveragepremiu sector.AsummaryoftheEBITDA to apremium of20%to25%atthe ril 2006),took place ere havebeena in Australiarangesbetween30%and rity ofwinetransactionssummarised theoutlookforwineindustry theoutlookcurrentlyprevailing. (which inmostcasesreflected the vel, although thisvariesdepending on nce should beplacedonthemultiples d market price of eachcompanies’ large numberof m paidabove the listed
Historical in betterequity EBITDA multiples 51 12.2 15.1 10.0 11.2 46 12.5 14.6 10.4 11.7
Forecast 15.3 14.1 3.2 8.4
52
188 190 189 In contrast,whilesome ofthebeertr (b) (a) implied from thetransactions inthe Australianbeverage revenue andearningsaregenerated from itsbeerbusiness.The multiples transaction multiples whenvaluingLion In ouropinion, more relianceshould beplacedon thebeertradingand taken placeatrelatively highEB Further, recent transactio an upwardtrendoverrecentyears,asshownbelow: we notethat transaction multiples for 01–20 1 1. 98 02 9.4 9.9 10.0 10.2 n/a 10.2 10.4 12.4 10.7 9.8 12.4 10.9 13.7 10.2 10.6 14.0 10.6 10.7 15.2 n/a 10.7 12.4 11.1 12.4 11.4 12 13.3 available. –not n/a 17 14.2 17 15.1 2001 –2003 14 9 2002 –2004 8 2003 –2005 6 2004 –2006 2005 –2007 2006 –2008 2007 –2009
EBITDA transaction multiples for beercompanies Nov 07 Apr 08 Oct 08 Oct 08 Dec 08 Date Summary of Australian beverage Years available. –not n/a Thisexcludes the earnings contributionfro 1 Note:
been 12.3. to the acquisition. were earnings If these acquisition. the to
Foods); and companies reportingdepressedearni to thebeersector) transactions from thedairysector (which arenotdirectlycomparable National Foods National Dairy Farmers Beverages Frucor Golden Circle Australia Schweppes Target transactions Number of
n evidenceintheAustralianbeverages sector has also Kirin Holdings Kirin Holdings Suntory Holdings Australia Heinz Asahi Breweries Acquirer
Historical sector transaction multiples transaction sector ITDA multiples, asshownbelow:
Simple average
ansaction evidence isalsorelatively old, included, the EBITDA multiple would have beer company acquisitions haveshown m the Red Bull contract which which was lost contract prior Bull Red m the Nathan asthelargemajority of Forecast ngs (GoldenCircleandNational Enterprise
2,800 1,300 1,185 value $m 910 288
Historical
sectorinclude: Historical
EBITDA multiples
16.5 12.8 13.3 13.1 15.2 Median (1) Forecast n/a n/a n/a n/a Forecast 12.5
53
113
lion nathan limited 2009 114 lion nathan limited 2009 191 Relative size,riskandgrowth prospects While wehavehadregardforthese (c) (i) (h) (g) (f) (e) Lion NathanNewZealand (d) (c) (b) (a) Lion NathanAustralia are discussedbelow: Australia, LionNathanNewZealandandWine. Thesematters also hadregardtothesize,riskandgr In ordertoassess the appropriate EBITDA multiplefor Lion Nathanwehave relevant forthereasonssetoutabove.
Farmers andGoldenCircle). transactions offeringahighlevelofrelativepotentialsynergies(Dairy achieved from2012 estimate thatannualcash savi following completionofthenewAucklandbrewery site,management rates, thestate oftheeconomy andlowerincome percapita etc Australia, reflectingthesmaller si multiples for NewZealand companies aregenerally lowerthan in increasing earnings volatility if distribution arrangements arelost) some 17%ofvolume isgenerated and wideravailabilityofalcoholicbeverages competitor pricing, existence ofalargernumber ofsmaller competitors the NewZealandbeer marketishighly competitive duetoaggressive not shownsignificantgrowth Lion NathanNewZealandisthemarket leader,howeverEBITDAhas investment inbrandsand breweriesinrecent years further growth inEBITDAisprojec sales largelyreflectownbrands expand breweries significant investment has from Boag’s Nathan NewZealand,evenafterba Lion NathanAustraliahasachieved been incurred inrecent transactions theyarethereforeless ngs ofaroundNZ$15million willbe owth prospectsforeachofLionNathan (i.e.minimal agencysales) ze of the market, higherinterest ze ofthemarket, from agencybrands(potentially cking outtheEBITDAcontribution ted duetothebenefitsof higher earningsgrowththanLion yearstoupgradeand 54
193 Conclusion onappropriateEBITDAmultiples 192 195 Investment inLittleWorldBeveragesLimited 194 Value ofcorebusinesses valuation purposes. is appropriatewhenappliedtothe Based onthe above,inour opinion,anEBITDAmultiplerange of11.5to12.5 Lion NathanNewZealandbusinessesrespectively. ended 31March2009wasgeneratedby EBITDA (beforeSGARAadjustments andco Further, itshouldbenotedthata (l) (k) (j) Lion NathanWine Brewing. premium market beer throughitswholly Beverages Limited (LWB).LWB listedontheASXandfocuses is As statedinSectionIIILion Nathanowns40%ofthesharesinLittleWorld debt) isasfollows: On thisbasisthevalueofLionNathan business core of Value Enterprise value EBITDA multiple Operating EBITDA
owned) brands. a highproportionofsalesvolume is businesses, butofferssignificantgrowthpotential the LionNathanWine businessissignificantly smaller thanthebeer risks conditions andisimpacted bywineindustrydynamics andagricultural businesses, asperformance is Lion NathanWine exhibitsmore pproximately 83%and15%ofoperating level ofoperatingEBITDAadoptedfor more correlated witheconomic ’s coreoperating the LionNathanAustraliaand ownedsubsidiary,LittleCreatures volatile earnings thanthe beer generated byagency(ratherthan rporate costs)inthesixmonths ,4. 8,312.5 7,647.5 businesses (before 6. 665.0 665.0 A$m Low Low 15 12.5 11.5
High A$m
55
115
lion nathan limited 2009 116 lion nathan limited 2009 201 200 199 198 197 196 55 54 The most up-to-date financial results publicly available. available. financial most results The publicly up-to-date Beingthemost recent financia LWB. to 20%the listed market price when In thecircumstances weconsideritis (b) (a) that: price. When assessingtheappropriate bevalued shareholding inLWBshould Given thesizeofstrategicstake basis onwhichtoassessthevalu we haveassumed thatthelistedmarket priceofLWB sharesisareasonable earnings growthbeingachieved.Acco this EBITDAmultiple does notappear unreasonable giventhe level of Whilst thevolume ofLWBsharestradedontheASXislow,inouropinion, EBITDA multiple forLWB wouldbearound10. A$10 million inthe year ending30June 31 December 2008itappears likely Given thegrowthinEBITDAachie month period. significantly expandingitsbrewingand to thepriorcorrespondingperiod).Th approximately A$5.0million (representing In thesixmonthsended31December 2008 was approximately A$106million. approximately A$88million. Asthe share price(VWAP)inthethreemonths ended30June2009)was The market onthevolume average capitalisation ofLWB(based weighted A$18 million asat31December 2008,
empirical evidence ontakeovers control, LWBafullcontrolpremiu as LionNathanholdsasignificant the likelihoodoffuturecorporateactivity price ofLWBsharesreflects,atle given thesizeofLionNathan’sho l position publicly available.
e ofLionNathan’sshareholding. ved inthesixmonthsended held, inouropinion,LionNathan’s that LWB’sEBITDAwillexceed company netborrowings ofaround had appropriate toapplyapremium of10% premium wehaveformed theview is wasachieveddespitethecompany valuingLion Nathan’sshareholdingin 54 rdingly, forthepurposeofourreport atapremium tothelistedmarket ) shouldnotbeapplied. hospitality operationsduringthesix theimplied enterprise valueof LWB 2009. Onthisbasistheimplied FY09 ast inpart,somepremium reflecting lding itislikely thatthemarket voting interestin,butdoesnot m (generally30%to35%basedon 55 an increaseofsome59%compared LWB generatedEBITDA of 56
respect of the sale of the the saleof respect of the 202 56 206 205 204 Auckland brewerysalereceivable 203 The quantum of additional capital expenditure in FY10 is broadly equivalent to the receivable in the receivable to equivalent is in FY10 broadly expenditure capital additional of quantum The than depreciationintheshort-term give shareholding inLWB: On thisbasiswehaveadoptedthefollowing valueforLionNathan’s in theperiodtoFY10). projected depreciationcharges(alth is expectedtobeofasustainingnatu We havealsobeenadvisedthatco going capitalexpenditurelevels. brewery upgrades andexpansions) is to theconstruction of the newAuckla capital expenditureintheperiodto30 should notbetreatedasasurplusasset Notwithstanding thesignificantsizeof was NZ$94.5million. discounted atacostofdebt8%pe at 31March2009thepresentvalueof receivable onexitfrom thesite,whichiscurrentlyexpectedtobein2011.As was received.Thebalanceofthe September 2007forNZ$162million, ofwhichadepositNZ$50million As statedinSectionIIIthecurrent either thecontinuityofow values above(althoughtheabilitytoutil would bepayableifLionNathan’sLW Given theexistence of significant tax losse Lion Nathan’s shareholding in LWB Value attributed to Lion Nathan shareholding (m) Number ofshares heldLion by Nathan (m) Adjusted share price range (10% to 20%) Premium applicable when valuing Lion Nathan shareholding VWAP in 3 months ended 26 May 2009 existing Auckland brewery. brewery. Auckland existing
nership orthesame business
56 purchase price (NZ$112million) is
mmencing FY11annualcapitalexpenditure Auckland brewery sitewas soldin ough capitalexpenditu re, atalevelbroadlycomparable to r annum whichweconsiderreasonable) expected tosignificantly exceedon- nd breweryandthecompletion ofother September 2010(whichlargelyrelates this receivable(whichhasbeen B sharesweresoldattheassessed for valuationpurposes.Thisisbecause this receivable,inouropinion,it n thelarge capitalexpenditure incurred ise thesetaxlossesisdependenton s itappears that no capitalgains tax test beingsatisfied). 36 23.65 23.65 87 42.33 38.79 Low Low 0.15 0.30 .9 1.49 1.49 .4 1.79 1.64 A$ re may belower
High A$
57
117
lion nathan limited 2009 118 lion nathan limited 2009 ular, in the EBITDA multiples applied. EBITDA multiplesapplied. the in inparticular, values, enterprise assessed our 208 Other assets 207 57 211 210 209 Net debt
We haveWe allowedforthe projected in Australia. upgrade projectscurrentlyunderwayin The following surplusassets have been identified: enterprise value of theLion Nathan For valuationpurposeswehavetherefor That isconsistentwiththeestimate Consequently, wehaveadoptednetde payment interim ofthe dividend). basis, thenetdebthasalsobeena As theconsiderationunderScheme A$0.22 pershare. increased on23June2009duetothe However, netdebtistypicallyhigherin As at31March2009LionNathanhadnetdebt ofA$1,766.8million. Surplus assets asset position Net derivative Wineryassets held for saleincluding surplusinventory 1 The defined benefit superannuation fund surplus1 has been recognised on an after tax Note: Lion Nathan – surplus assets to the close be incurred out Net ofincomewould positions. which tax 3 ta capital ofsubstantial the existence to Due 2 New ZealandNew defined benefit superannuationfundsurplus basis. This is because the superannuation incurred upon any sale for the above assessed values. Lion Nathan. to taxdeductible would thebe madethe in be of surplus absence 57
savings in annualoperating costs (3)
ssessed onthisbasis(i.e.reflectingthe d netdebtpositionasat30June2009. businesses inrespectofthebrewery payment interim ofthe dividendof contributions which woul bt ofA$1,880forvaluationpurposes. x losses no capital gains tax is likely to be to taxislikely losses capitalgains x no is tobemade onan“ex-dividend” New Zealandandnearingcompletion the secondhalfofyear,andalso e made no adjustment toourassessed (2) (1) associated with these projectsin A$m Low Low 16.3 16.3 25.0 29.0 53 50.3 45.3
d otherwise need to d otherwiseneed 4.0 5.0
High A$m
58
213 Value ofLionNathan 212 Shares onissue 214 Implied EBITandPEmultiples is asfollows: On thisbasis,thevalueof100%Li shares onissue. profit forFY09.Accordingly,ourvalu executives willbeentitled tothese shares if Lion Nathanachievesitsexpected connection withalong-term incentive of thesesharesareheld by LionNathan Achievement RightsTrustin Lion Nathan currently has534.2million shareson issue.While 2.05million below: The EBITandPEmultiples implied byourassessed valuerange areshown BT(r-infcn tm)($) 0. 570 570.0 507.0 507.0 EBIT (pre-significant items) (A$m) Enterprise 7,647.5 8,312.57,647.5 8,312.5 value (A$m) P pesgiiaties A) 052 .1 0.571 0.512 0.512 EPS (pre-significant items) (A$) Value per share (A$) Implied multiples (A$) share per Value Shares on issue Value of LWB shares Nathan Lion of 100% of Value Enterprise value EBITDA multiple Operating EBITDA PE ratio EBIT multiple Value of 100%Lionof Nathan Net debt Other surplus assets
FY08 Low Low 1.5 1.1 1.5 $12.21 $10.95 $12.21 $10.95 21.4 23.8 19.2 20.7 21.4 23.8 15.1 16.4 13.4 14.6 14.6 13.4 16.4 15.1
on Nathanacontrol
plan, weunderstandthatsenior ation calculationsassume 534.2million FY08 High
1800 (1,880.0) (1,880.0) ,5. 6,525.1 5,851.6 ,4. 8,312.5 7,647.5 A$10.95 A$12.21 A$12.21 A$10.95 A$m Low Low 6. 665.0 665.0 3. 534.2 534.2 FY09 88 42.3 38.8 15 12.5 11.5 53 50.3 45.3 Low Low
ling interestbasis
(1) (2) 0.590 High A$m FY09 High 570.0
(1) (2)
59
119
lion nathan limited 2009 120 lion nathan limited 2009 216 215
takeover orsimilar proposal). listed market priceofthecompany’s sharespriortotheannouncement ofa a premium forcontrol(whichgenerally beer companies (set out inAppendix D)oncetheyareadjusted toincorporate multiples are alsoconsistent withthe PEmultiples of thelisted comparable (notwithstanding significantupheavals market positionsanditsimpressivefi and reflectthequalityofLionNathan’s In ouropinion thesemultiples are reasonable on a controlling interest basis multiples basedonourestimate of (30 September), inouropinion,more re Given thedateofvaluationand EBIT Less depreciation and amortisation EBITDAadopted for valuation purposes(refer paragraph 177) asfollows: iscalculated This 1 Note: Based on Lion Nathan’s market guidance for net profit after2 tax (before significant items) of A$305 million to A$315 million. Lion Nathan’sfinancialyearend Lion Nathan’searningsforFY09. nancial performance overrecentyears in theglobaleconomy). ThePE rangesfrom 30%to35%abovethe businessesandmanagement, itsstrong gard shouldbehadtotheforecast
A$m
570 (95) 665
60
219 218 217 Evaluation oftheProposal VII 224 223 Other qualitativefactors 222 221 220 Fairness Assessment oftheScheme We haveformed thisopinionforthefollowingreasons. Scheme. We thereforerecommend thatLionNathanshareholdersvoteinfavourofthe shareholders. Scheme andreasonablein isfair In ouropiniontheacquisitionofLionNathansharesbyKirinunder interests” ofLionNathanshareholders. Consequently, inouropinion,theScheme also be“inthebestinte fair. Further,inouropinion,iftheSc Pursuant toASICRegulatoryGuide111,a the guidelinessetoutin We thereforeconsidertheCashPayments tobefairwhenassessedbasedon Lion Nathan ona100%controlling interest basis. Accordingly, theCashPayments liew (b) (a) Payments), comprising: then LionNathan shareholders willr comparison, ifLionNathanshareholders a controllinginterestbasisatbetween A$10.95andA$12.21pershare.In As notedinSectionVI,LEAhasvalued
as attheSpecialDividend recorddate. a SpecialDividendofA$0.50pershar as attheScheme recorddate Scheme Considerationof A$11.50pershareinrelationtosharesheld rests” ofshareholders. ASIC RegulatoryGuide111. thebestinterestsofLionNathan eceive A$12.00 cashpershare(theCash heme is“fairandreasonable”itmust ithin ourassessedrangeofvaluesfor 100%ofthesharesinLionNathanon andtheCourtapproveScheme is also“reasonable”and“inthebest transaction isreasonableifit e inrelation toeachshare held 61
121
lion nathan limited 2009 122 lion nathan limited 2009 227 Extent towhichacontrolpremiumisbeingpaid 226 225
(d) (c) (b) (a) in thepre-bid price). This premium rangereflects thefact that: announcement ofthebid(assuming nospecu market priceofthetargetcompany’ takeovers inAustraliagenerallyrange Empirical evidenceindicatesthatav These issues arediscussed indetail below. (g) (f) (e) (d) (c) (b) (a) Lion NathanshareholdersLEAhas In assessingwhethertheScheme isr
entity beingacquiredthroughsynerg a controllingshareholderisoften management policyandthestrate a controllingshareholdercancontro the redeployment oftheproceeds the controllingshareholdercandirect otherwise beunabletodoasaminority shareholder free cashflowsofthecompanybeingacquired,whichitwould the ownerof100%sharesin disadvantages associatedwiththeScheme. other qualitativeandstrategic the likelypriceofLionNathansharesifScheme isnotapproved to theannouncement Scheme ofthe the listedmarket priceof LionNath the likelihoodofanalternativeofferorproposal Lion Nathanshareholders the extenttowhichashareofthesebenefitsisbeingpaid synergy /rationalisationbenefitsli the strategicvalueofLionNathan shareholders the extentto whichacontrol premium isbeingpaid toLionNathan s shares three monthspriortothe s also considered,inparticular: erage premiums paidinsuccessful easonable and inthebestinterestsof issues, risksandadvantages between 30%and35%abovethelisted gic directionofthecompany able toincrease thevalue ofthe toKirin,includingthelevelof kely tobegeneratedbyKirinand acompany obtainsaccesstoallthe an sharesintheperiodsubsequent l theappointment ofdirectors, ies and/orrationalisationsavings. lation ofthetake the disposalofsurplusassetsand over isreflected 62
8 June 2009. June 2009. 8 the premiums implied bythe Cash Payments. material impact on the price of Lion Nathan shares during the periods over which we have measured no had these that announcements itappears 2009. However, February on 9 it withdrew which Limited ASX. the the large ASX Thisisbecause on only. trading 229 228 60 59 58 231 230 On the New Zealand Stock Exchange (NZSE) Lion Nathan shares traded ex dividend on Amatil Coca-Cola to merger proposal a submitted Nathan Lion 2008 November 17 on that note We For the purposes of calculating the premiums implied by the Cash Payments we have had regard to Lion NathanandKirin.Duringthispe trading haltwasrequestedtoperm received byLionNathanafterthecloseoftradingon22April2009.The placed inatradinghaltfollowing aconf Prior totheopeningoftradingon23 We havecalculatedthepremium implie implied premium offer calculationpurposes,determined asfollows: basis wehavethereforeadoptedatotal considerationofA$12.22persharefor Accordingly, toensuretheimplied pr entitlement tothisdividend. measured thepremiums implied bytheCashPayments) traded withan to theex-dateof1June2009 dividend ofA$0.22pershareon23June We notethatLionNathanshareholders(i on 27April2009. 24 April2009).Thekeyterms oftheScheme were subsequentlyannounced results forthesixmonths to31March2009wereannounced(on ASX) to theVWAPandclosingpricesofLion Nathanshares(astradedonthe Total value to Lion Nathan shareholders Lion Nathan’s FY09 interim dividend Cash Payments Total consideration for offer premiumcalculations 58 forperiodsuptoandincluding22April2009.
60 (includingtheperiodsoverwhichwehave
it confidentialdiscussionsbetween majority of Lion majority Lion of Nathan April2009LionNathanshareswere emium iscalculatedonanappropriate riod thecompany’s preliminary trading d bytheCashPayments byreference idential approachbyKirin,which was 2009 andthatthesharepricesprior ncluding Kirin)r 59
shares are tradedonthe eceived aninterim
12.00 12.22 0.22 A$
63
123
lion nathan limited 2009 124 lion nathan limited 2009 232 233 The implied offer premium relativeto of LionNathansharespriorto considered whetherthis reflectsabnorma Given thehighpremiums implied bytheCashPayments wehavealso 22 April2009isshownbelow: Including Lion Nathan’s FY09 interim dividend of A$0.22 2per share. This is Based on market pricestraded onthe ASXonly. 1 Note: Implied offer premium relative to recen • • VWAP: • • • share priceon: Closing consideration Total
interim dividend for FY09. the to entitlement an included above share prices basis. The (cum-dividend) consistent appropriate so that bothth 3 months to 22 April 2009 1 month to 22 April 2009 shares) Lion Nathan in halt the trading to prior months 2009 (3 January 22 shares) Lion Nathan in halt trading the to prior month (1 2009 March 20 in NathanLion shares) halt trading priortothe day lasttrading (the April 2009 22 (2) e Cash Paymentsand the shar theannouncement oftheScheme. t Lion Nathanshare price LionNathansharepricespriorto lly large declinesin themarket price e prices are compared ona share price Lion Nathan 12.22 A$ 8.21 7.99 8.24 7.64 8.31
(1)
Implied offer premium % 48.8 52.9 48.3 59.9 47.1
64
238 237 236 235 234
-60% -40% -20% global financial crisis: (a) Further wenote that: existed. that normally paidwherenosignificant relative tothe recent prebi Nathan. Insuch circumstances wew therefore has, asaminimum, significan Nathan, togetherwiththreerepresentatives ontheLionNathanBoard.Kirin In addition,asnotedabove,Kirinha takeovers generally. premium whichissignificantlyabovetheaveragepremiums paidinsuccessful Accordingly, wehaveconcludedthat Scheme. the LionNathansharepriceinpe implied bytheCashPayments arenotattributabletoanyrelativeweaknessin qualities, inouropinion,theabovegraph Nathan’s strongfinancialperforman While weconsiderthisout-performance islikely tobea reference totheS&PASX200Index),pa shares havesignificantlyout-perform In thisregard,asshownbelow,we 20% 40% 60% 0% a-7Ar0 u-7Ot0 a-8Ar0 u-8Ot0 a-9Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07
Source: Weblink. Source: CCA assist withthefundingof LionNath subscribe forupto327million newLionNathan sharesinorderto of A$11.50perLionNathanshareat the CashPayments ofA$12.00perLi Lion Nathan Lion Relativity Chart:Lion NathanLimited vs S&P/ASX 200 S&P/ASX 200 From 1 January 2007 to 30 June 2009 d pricesofLionNathanshareswould belowerthan note thatsince1January2007LionNathan ce andits“defensive”investment s anexisting46.1%interestinLion riod priortotheannouncement ofthe ould expectthatth theCashPayments imply anoffer ed thebroadermarket (measured by shareholdinginthetargetcompany t influenceovertheoperationsofLion rticularly sincetheon-setof also indicatesthat an’s (nowwithdrawn)offer for whichKirinhadagreedto on Nathanshareexceedtheprice e premium offered reflection ofLion thehighpremiums 65
125
lion nathan limited 2009 126 lion nathan limited 2009 operations in operations Australia. 63 62 61 242 241 240 Benefits toKirin 239 Such benefits by their nature are only likely to be available to a purchaser with large existing existing large a with to purchaser beavailable likely nature to are their only benefits by Such Earnings per share. Once historical pricesare adjusted forshare capital changes. (b) value oftheLionNa transaction areunlikelytobematerial potential synergies,inouropinion,the However, basedonourunderstandingof business interestsinAustralia. some throughthe rationalisationofits scopeforKirintogeneratesavings In addition,Kirin’sownershipinNati (f) (e) (d) (c) (b) (a) benefits oftheScheme toKirin. investor presentationdated27April2009outlining, amongst othermatters, the Following theannouncement ofthekeyterms oftheScheme Kirinreleasedan Lion Nathan willpasstoKirinif theScheme isapproved. Lion Nathanshareholdersarebeingcomp generally paidincomparable circum Nathan shareholderswithapremium thatexceeds observedpremiums Having regardtotheabove,inourop
A$12.00 persharepriortothe Lion Nathansharesnevertradedat pre-goodwill amortisationbasis” the firstfullfinancialyearfollowi Kirin’s expectationthat “Lion Nathan’santicipatedstrongcashflows” the abilitytorepayacquisitionfinancing Kirin creating astrongplatformforfutu operations” further crosspromotionofproductswithKirin’sexistingbrewing “ownership ofLN’sstrongmix providing a“strongplatformforbeveragesgrowth inAustralasia”as increased geographicdiversifica exposure tothehighlyattracti strengthening Kirin’soffshore than businesses.
63 the acquisitionwouldbe
Thebenefitsid stances. Accordingly,inouropinion, inion, theCashPayments provideLion ve Australasianbrewingindustry” onal FoodsandDairyFarmers provides intheoverallcontextofourassessed announcement Scheme. ofthe earnings baseandproviding potential synergiesarisingfrom the of brandsmayprovidescopefor tion ofKirin’searningsmix thelikelynatureandquantum of . ng completionoftheProposalona re regionalbeveragesexpansionby ensated forthefactthatcontrolof a priceabovetheCashPayments of entified included: “relatively quickly”
“EPS 62 accretivein “greater 61 dueto
66
243 The likelihoodofanalternativeoffer 247 Summary ofopinionontheScheme 246 245 Likely priceofLionNathansharesiftheSchemeisnotapproved 244 proposal totheScheme beingreceivedpr In ouropinion,thereisnorealisticli shareholders iftheScheme proceeds. We summarise belowthelikelyadvantages anddisadvantages forLionNathan the Scheme. realise asignificantly lower priceforth sell theirLion Nathanshares aretherefor If theSchemeisnotimplemented those controlling interestbasis). the valueofLionNathanonaportfol our valuationandtheCashPayments (c in theshort-term, LionNathanshareswould tradeatasigni no higherofferoralternativeproposalemer If theSchemeisnotapprovedbyLion superior offerorproposaltoemerge. Cash Payments. Thisindicates that Further, wenotethattheLionNathansh (e) (d) (c) (b) (a) because:
outside ofJapanby2015. with Kirin’sstatedobjectiveto the offertoacquire100%ofshar businesses the LionNathanbusinessishighly indicated any intention of sellingit Kirin hashelditsshareholdingin not succeedunlessKirinagreed any alternativeofferbyanotherpa deter alternative offerors onissue,whichislikelyto Kirin owns46.1%ofLionNathanshares market participantsdonotexpecta kelihood ofahigherofferorsuperior io basisandthevalueona100% Nathan shareholdersandtheCourt generate 30%ofrevenueandprofit tosellitsshareholding eir sharesthanwillbepayableunder onsistent withthedifference between Lion Nathanshareholderswhowishto are price continues to tradebelow the Lion Nathansince 1998andhasnot e likely, atleast inthe short-term, to ior totheScheme meeting.Thisis rty for100%ofLionNathancould complementary toKirin’sexisting ges, wewouldexpectthat,atleast es inLion Nathanisconsistent ficant discountto 67
127
lion nathan limited 2009 128 lion nathan limited 2009 248 Advantages 64 251 250 Disadvantages 249 Referparagraph 173 for further information, includ (b) (a) The Scheme hasthefollowingbenef value ofthisfutureearningspotential years expect LionNathantoachievefurther In particular,basedoninformation review of ongoingoperationsoverandabovethatreflectedintheCashPayments. therefore not participate inanyfuture no longerholdaninterestinLionNath Lion Nathan shareholders shouldnotethatiftheScheme isapprovedtheywill shares willbereceivedpriortotheScheme meeting. shares thereisnorealisticlikelihoodth Further, itshouldbenotedthatasKi (e) (d) (c)
64 . However,ourvaluationofLionNathanconfirms thatthe current market prices ofLionNathanshar the CashPayments representa Investments Commission (ASIC)RegulatoryGuide111 assessed under theguidelines setout inAustralian Securities & per share,and aretherefore fairto assessed valuerangefor100%ofLionNathanA$10.95toA$12.21 the CashPayments ofA$12.00cashper with theportfolio nature of significant discounttoourvaluation offer orproposal,thepriceofLionNath if theSchemedoesnotproceed,and some shareholdersbyuptoA$0.21pershare shareholders respectively, therebyincreasing thepotential value to imputation creditstoLionNathan the SpecialDividendallows to targetcompanyshareholders furthermore, thepremium exceedsobserved premiums generallypaid Lion Nathanclosingshareprice initial approachbyKirin(on23Ap
individualshareholdings). its forLionNathanshareholders: rin alreadyowns46.1%ofLionNathan ecasts for future years. ing detailsof broker forecastsfuture value createdbythecompany asaresult is reflected intheCashPayments. increases inprofitabilityfuture significant premium totherecent incomparable circumstances an. LionNathanshareholderswill at acompeting offerforLionNathan release offrankingcreditsand ’s AustralianandNewZealand Lion Nathan shareholders when es priortotheannouncement ofthe ed forthepurposesofthisreport,we ril 2009)andarehigherthanany and theCashPayments (consistent in theabsence ofanalternative an sharesislikelytotradeata share lieatthehighendofour 68
252 Conclusion
interests ofLionNathanshareholders. Nathan sharesbyKirinundertheScheme is On balance,giventheaboveanalysis , weconsidertheacquisitionofLion fairandreasonableinthebest 69
129
lion nathan limited 2009 130 lion nathan limited 2009 2 1 Limited &Associates Lonergan Edwards Financial ServicesGuide 7 6 General financialproductadvice 5 Financial serviceswe 4 3 Guide Financial Services LEA holdsAustralianFinancial ServicesLicenceNo.246532. commercial andregulatorydisputes. commercial litigation,taxandstamp duty Independent Expert’sReports(IER)in specialist valuation firm wh Lonergan Edwards &AssociatesLimited (ABN53095445560)(LEA)isa Services Licence toassistyouinthisassessment. personal financialproductadvicefrom assessing thesuitabilityof You shouldconsideryourownobjectives taking intoaccountyourpersonalobjec The IERcontainsonlygeneralfinancial stocks andbonds. interests inmanaged investment sche advice inrelationtovariousfinancialpr services toretailandwholesale client Our Australianfinancialserviceslicence against usever arise how theywillbedealtwith. may receiveinconnection withtheprepar generally, thefinancialservicesweare product advicecontainedintheIER.Th This FSGisdesignedtoassi Scheme. Scheme BooklettobesentLionNath Guide (FSG)inconnectionwithitspr The CorporationsAct2001authorisesLEA are licensedtoprovide theIERtoyoursituation.Youmaywishobtain ich providesvaluationadvice,reportsand st retail clients intheir useof any general financial mes, products,debentures, superannuation s, includingprovidingfinancialproduct eparation of anIERtoaccompany the relation to takeovers and mergers, relationtotakeoversand the holderofanAustralianFinancial licensed toprovide,theremuneration we tives, financialsitu oducts suchassecurities,derivatives, an shareholdersinconnectionwiththe product advice.Itwaspreparedwithout is FSGcontainsinformation aboutLEA allows ustoprovideabroadrangeof , financialsituationandneedswhen ation oftheIER,and ifcomplaints matters, assessments ofeconomicloss, toprovidethisFinancialServices ation orneeds. Appendix A 70
8 Fees, commissionsandoth 14 Contact details 13 12 Complaints 11 10 9 resolution service. Youwillnotbe charged for using theFOS service. Financial Ombudsman ServicesLimited of yourwrittennotification, of theagreement withthepersonwhoengage Fees arechargedonanhourlybasisor negotiated and agreedwith the entity LEA chargesfeestoproducereports, (or GPOBox1640,SydneyNSW 2001) Sydney NSW2000 363 GeorgeStreet Level 27 LEA canbecontactedbysendinga If wearenotabletoreso timely manner. listed below. We willendeavour tosatisfactorily resolveyour complaint ina If youhaveacomplaint, pleaseraiseitw referring prospectiveclientstous. We donotpaycommissions orprovide services provided toour clients. directors donotreceiveanycommissions orotherbenefitsaris contribution tothecompany andcoversallaspectsofperformance. Our clients. Theremuneration paidto All ofouremployeesreceive benefits, exceptforthefees forservicesreferredtoabove. Neither LEA noritsdirectorsandofficersreceivesanycommissions orother our feesarebasedonatime cost commissions orotherbenef based onoverallperformance andthefirm’s profitability,anddonotreceiveany lve yourcomplainttosa er benefitswemayreceive its arising directly from servicesprovidedtoour you areentitledtohaveyourmatter referredtothe asalary.Ouremployees basis usingagreedhourlyrates. our directorsreflect letter tothe following address: who engagesLEAtoprovideareport. including thisIER.Thesefeesare asafixedamountdependingontheterms other benefitstopartiesfor (FOS), anexternalcomplaints(FOS), ith usfirst,usingthecontactdetails s us.Intheprepar s theirindividual tisfaction within45days are eligibleforbonuses ing directlyfrom ation ofthisIER Appendix A 71
131
lion nathan limited 2009 132 lion nathan limited 2009 1 Qualifications Qualifications, declarationsandconsents 7 Consents 6 Indemnification 5 4 Interests 3 Declarations 2 finance, particularlyinrelationtoth authorised representativeshaveextensiv LEA isalicensedinvestment adviser is includedintheLionNathan Scheme Booklet. LEA consentstotheinclusion ofthisre arising fromanyfailuretosupply Lion Nathanwhichisfalseormisleading oromits material particularsor its relianceoninformation ordocumentation providedbyoronbehalf of to indemnify LEAinrelationtoanyclai agreementAs aconditionofLEA’s toprep or Kirinpriortotheprep LEA hashadnopriorbusinessorprofe indirectly, fororinconnectionwith of theabovefee,LEAwillnot receive a of A$275,000plusGSTforthepreparation of thisreport.With theexception interest intheoutcome oftheScheme. At thedateofthisreport,neither and reasonableinthebestinte than asanexpressionof ouropinionas shareholders. Itisnotintendedthat this reportshouldserveanypurposeother Lion Nathan toaccompany theScheme Booklettobesent toLionNathan This reporthasbeenpreparedatthere advice. 16 yearsand 20yearsexperience respectiv each authorised representatives ofLEA.MrEdwardsandHolthave over This reportwaspreparedbyMrCraig Edwards andMrMartinHolt,whoare have preparedmore than100IndependentExpert’sReportstoshareholders. aration ofthisreport. LEA, MrEdwardsnorHolthaveany relevant documents orinformation. rests ofLionNathanshareholders. thepreparationofthisreport. e valuationofsharesandbusinesses under theCorporationsAct.LEA’s quest oftheIndependentDirectors LEAisentitledtoreceive afixed fee ssional relationshipwith LionNathan to whetherornottheScheme isfair port intheform andcontext inwhichit ny otherbenefits,eitherdirectlyor m arisingfrom orinconnectionwith e experienceinthefieldofcorporate ely intheprovis are thisreport,LionNathanagrees ion ofvaluation Appendix B 72
2 1 Lion NathanAustralia Historical operating performance bysegment
months ended31March2009issummarised below: corporate costs)forthethreeyearsended30September 2008andthesix The financialperformance ofLionNa Adelaide, PerthandLaunceston),aswellasmaller craftbreweryinSydney. range ofbeersfrom fivemajor brewer The LionNathanAustraliabusinessproduces, markets, sellsanddistributesa Net sales revenue Volume oflitres) (millions 2 Before unallocated corporate 1 Net of excise and discounts. Note: Operating EBIT growth (33.0) revenue growth Net sales price (61.2) innet selling Average growth Volume growth litre EBITper Operating (54.8) litre revenue per Net sales EBITDA margin Operating (57.8) EBIT Operating Depreciation and amortisation Lion Nathan Australia –financial performance Operating EBITDA (2) (1)
1,201.5 1,287.0 1,431.8 832.0 (2) costs and non-recurring items. items. non-recurring and costs 30 Sep 06 Year to A$m 394.8 413.6 446.1 280.3 394.8 413.6 452.6 468.4 507.3 313.3 452.6 468.4 695.0 699.0 731.0 406.0 406.0 731.0 699.0 695.0 $0.57 $0.59 $0.61 $0.69 $0.57 $0.59 $1.96 $2.05 $1.73 $1.84 35.4% 37.7% 37.7% 36.4%
4.1% 4.8% 7.9% 4.1% 4.8% 12.7% 5.1% 7.1% 11.3% 11.3% 6.4% 6.3% 3.6% 6.5% 4.6% 4.6% 1.5% 0.6%
than Australia (before unallocated ies (oneineachofSydney,Brisbane,
30 Sep 07 Year to A$m
30 Sep 08 Year to A$m
Appendix C 31 Mar 09 6 mths to A$m
73
133
lion nathan limited 2009 134 lion nathan limited 2009 Hahn Super Dry, Hahn Premium, Hahn Premiu 3 65 Australian “Power” brands comprise Tooheys New, Tooheys comprise brands “Power” Australian • • Year ended30September2006 Australia overtheaboveperiods: The following commentsrelate tothe • • • • • • • • • Year ended30September2007 • •
brands, Volume growth of4.2%wasach investment Operating EBIT increased4.1%despitea29%increaseinbrand continued costofbra slightly reflecting increases inal Notwithstanding thehighersalesrevenue,operating margins fell Rum brandanddistilleryinApril2007 to fullnationaldistributionandth In theSpirits/RTDsegment Bourbonprogressively moved McKenna nationwide marketing campaign 11% despitenewmarket entrants. increaseditsvolumesXXXX Gold by5%andnetsalesrevenue contributed tothedeclineof6% such asTooheys ExtraDryandHa traditional mainstream beercategory. Further,thesuccessof brands The shift topremium andmid-streng volume, increasedvolumes by3.7% Lion Nathan's Powerbrands,whic in NSW wherethemarket wasdownanestimated 1.6% However volume growthflattenedas growth (launched inSeptember 2006)beinga $50 million oftheincremental revenue,withHahnSuperDry Product innovationdevelopedoverth growth inthe total market Total beervolumes inAustraliacreased0.4%consistentwith the Net salesrevenueincreased7.1% bottled spiritandRTDvariants. launched inAugust2006intoSouth-Ea McKenna Straight Kentucky BourbonWhisky wassuccessfully mainstream beercategoryoverall International premium volum brand 65 comparedto1.5%overallvolume growth
nd andotherinitiatives. m Light,James Squire, Heineken and Beck’s. Tooheys Extra Dry, Bitter, Extra XXXX Gold, Tooheys XXXX operating performance ofLionNathan uminium andbarleycosts the in salesvolumes ofTooheysNew ieved bythecompany’s“Power” onavolume increaseof0.6% e company acquiredtheInnerCircle achieved volume declinesof1.3% h accountfor78%ofportfolio hn SuperDrywaslikelytohave This performance wasassistedbya es increased20% whereasthe th beersadversely impacted the e lastthreeyearscontributed the yearprogressed,particularly significant contributortothis st Queenslandinfullstrength Appendix C 74
66
AC Nielsen MAT volume growth as at February 2009. • • • Six monthsended31March2009 • • • • • • • • Year ended30September2008 • •
Nielsen the volume growthinthemarket growth was1%moving annualtotal(MAT Once thepriorperiodvolumes arenormalised forBoag’svolume good tapbeervolumes Volume growthwasdrivenbycorebrandperformance, and Boag’s an averagenetselling Net salesrevenueincreased11.3%duetovolume growthof4.6%and on RTDbeveragesinAustralia. spirits andRTD salesteamandfollowedtheimposition ofhighertaxes with Barcardi Martini. Thisconsolidatedthese brandsinto theexisting brands weresoldinAustraliathr From 1October2008,McKennaB premium pricingandthereforeimproved margins) premium productswhichhave brand Some oftheincreasealsorefl the increase incommodity pricesgene Raw material costs(particularlygl tap sales premises inNSW, SouthAustralia The introductionofsmoking bans V8 Supercarseries) to innovativemarketing campaigns (whi brand), XXXXGold,increasedvolum The company's largestbrand(and Tasmania increasing capacityandensuringthatal committed tospending$25 million toupgradethe Boag’sbrewery, achieved since integra Boag’s wasacquiredinJanuary2008with6%volume growthbeing Stag (amainstream low carbohydrat products. Recentbeerbrandslaunc 10% ofnetsalesrevenuewasfrom recentinnovation andnew Including Boag’s,volumes increased4.6% volumes uponly0.1% were Excluding Boag’s, beervolumes grewby0.5%inamarket where increased volumes by14% Hahn SuperDrygrewvolumes byjustunder50%andJames Squire sales mix, asconsumers continue The increase innetselling price 66 )
tion ofthebusiness.Thecompany also price increaseof6.3% ected movesbyconsumers tomore per litrelargelyreflectedimproved of0.9%(asestimated byAC ough theBarcardi-Lionjointventure to movemore premium beers Australia's second largest beer in enclosedareasoflicensed ass andmalt) increased,reflecting ourbon andInnerCircleRum hed includeTooheysNewWhite and VictoriainJuly2007reduced e beer)andBarefootRadler highercosts(butalsoallow e by 3% and revenueby5%due e by3%and rally andexchangerateimpacts. l Boag’sbeerwillbebrewedin ch includedsponsorshipofthe ). Thisisslightlyaheadof Appendix C 75
135
lion nathan limited 2009 136 lion nathan limited 2009 5 4 Lion NathanNew Zealand • • • • months ended31March2009issummarised below: corporate costs)forthethreeyearsended30September 2008andthesix The financialperformance ofLionNath wine brandsledbytheWither Hills brand. and RTDbrands,ina operates acontractpackingcompany bottlinginternational and localspirits (Auckland, ChristchurchandDunedin)as range ofalcoholicbeveragesincludi Lion NathanNewZealandproduces,market • ercainadaotsto (44 (43 (86 (11.6) price innet selling Average growth (28.6) volume growth Total Beer volume growth (34.3) litre EBITper Operating litre revenue per Net sales EBITDA margin Operating (24.4) EBIT Operating Depreciation and amortisation LionNathan Zealand New –financialperformance Total volume (millions of litres) 185.0 186.0 189.0 105.0 105.0 91.0 189.0 171.0 186.0 171.0 Net sales revenue 185.0 170.0 litres) of (millions volume Total litres) of Beer volume (millions Operating EBITDA
profit contributionfrom Bo Continued investment intheBoag’s The improved salesmix alsoresultedinhigherprofitmargins excess of1,800) increase inthenumber oflocationsse Boag’s volumes increased 8%follo and BarefootRadlerperformed Two recentnewbrands,TooheysNew brewery upgrades. future benefits,includingfurther Lion Nathan’s brandsand breweriesisexpected togenerate additional More generally,theinvestment (2) (1) 5. 584.4 575.4 324.2 558.3 (2) ddition, distributesarange 30 Sep 06 Year to 111.1 121.0 68.1 118.6 NZ$m ag’s inthesecondhalf 04 $0.47 $0.48 $0.54 $0.47 $3.14 $3.04 $3.09 $3.02 20.7% 20.6% 21.0% 19.9% 86.7 86.7 90.0 56.5 85)(.% .% 4.1% (8.5%) (0.5%) 2.2% 5.7% 0.5% - 1.6% (0.9%) 4.9% 0.6% - ng beerfrom threemajor breweries
overanumber ofyearsin above originalexpectations an NewZealand(beforeunallocated savings from thenearlycompleted well asonesmaller brewery.Italso wing significantadvertisingandan brand isexpected toincreasethe s, sellsanddistributes aleading rving thebeerontap(currentlyin 30 Sep 07 Year to White Stag(alow-carbbeer) NZ$m of ownandagencyfine 30 Sep 08 Year to NZ$m
Appendix C 31 Mar 09 6 mths to NZ$m
76
6 67 Corona. New Zealand “Power” brandscomprise Speights, Li • • • Year ended30September2007 • • • • • • • • Year ended30September2006 New Zealandovertheaboveperiods: The following commentsrelate tothe 2 Before unallocated corporate 1 Net of excise and discounts. Note: Operating EBIT growth revenue growth Net sales
prior year,exportsgrew 14% (especiallytoHawaii While thecompany's domestic beervolumes consistentwiththe were wines andspiritsotherbusinesses Slightly lower beerearningswereoffsetbyimproved earningsfrom and highercommodity costs competitive operatingenvironment intheNewZealandbeer market Operating EBIT wasconsistent withtheprioryearreflectingahighly meet customerneeds. marketingThe salesand teams wererestructuredinordertobetter Coruba up13%andBulleitby137% The RTDportfoliogrewby8.2%ledSmirnoff varietiesup37%, which increasedby266% performances ofSmirnoffgrewby27%andGilbeysGin Vodkawhich Allied Domecqbrands.Thiswaspartially offset bythebrand The spirits portfolio declined by1.6% largely due tothelossof the the transfer of thedistribution right Premium winebrandgrowthof57% Speight’s achievednatio curtailed Advertising andpromotion forLi decision tonarrowthefocusof volume growth.LionReddeclin particular, Steinlager, Stella Arto Five ofthesix“Power”brands was notabletoberecoveredinpricing environment inNewZealand,particular Operating EBIT decreasedduetothechallengingoperating competitivemarket NewZealand businesses intoa“one-stop”business toincreaseefficiencyin the The NewZealandbusinesseshavere
costs and non-recurring items. items. non-recurring and costs nal growthof7.3% 32)- 3.8% 3.1% (3.2%) - 0.4% 4.7% (1.5%) (0.6%) on Red,and on Stella Artois Steinlager, Mac’s, operating performance ofLionNathan
67 achievedvolume growth.In is andCoronaallrecordedstrong ed (asexpected) followingthe on Redoutsidethisregionwas s for Wither HillstoLion Nathan brand totheregionnorthofTaupo. wasachieved,reflectinginpart structured from threeseparate ly inbeerwherecostinflation )
Appendix C 77
137
lion nathan limited 2009 138 lion nathan limited 2009
• • • • • • • Year ended30September2008 • • • • • • •
2011). in thefourthquarterofcalendar Auckland commenced,withfirstbrew The constructionofnewproduction revenue falling1.5% of contractsatthecont Generally thepricingenvironment and thelossofdistributioncontractsforMoetHennessy beverages asspiritswerenegativ respectively. Muchoftheincreas Wine andSpirits/RTDvolumes increased5.9%and22.2% distribution ofCoronaintheNewZealandmarket A longterm agreement wassignedinJuly2008forthecontinued Lion Nathan’sNewZealandportf moving tomorepremium beers.Thetotalpremium segment of a positivemiximpact followingnewbrandlaunchesandconsumers The NewZealandbeeroperationsgr to 0.3%forthemarket asawhole Lion Nathanachieveddomestic beervolume growthof0.5%compared subsequently offsetbyanabnormally wetwinter hot summer (boostingvolumes in The beermarket inNewZealandFY08 benefitedfrom anunusually McKenna Bourbonwasalsosuccessfullylaunched. launch the top10brandsinsupermarkets Steinlager Pure waslaunched andexceeded expectations,ranking in portfolio respectively, largely duetothe lossof theAllied Domecq brand Spirit andRTDbeveragevolumes declinedby15%and2% range ofsparklingwines and Mavenbrands.Thecompany al Oyster Bay,DelegatsandRiccadoona The winebusinessalsobenefitedfr Excluding Wither Hills likefor like wine volumesincreased 9% distribution rightsforWitherHills Wine volumes increased19%largelydue Overall domestic beerrevenuewas and 4%respectively,wh International premium Corona brands ract bottlingdivision,result ile SteinlagerClassicgrewvolumes by3% 2009 (withcompletion expectedin ely impactedbydiscountedimports olio increasedvolumes by29.5% e inthesectorcame from RTD the firsthalf)butthiswas (by value)withinsixweeksof transferred tothecompany in2006. remained challenging,andtheloss om newdistributionagreements for up 2.1%drivenbypremium brands so acquiredtheDanielLe Brun facilities atEastTamaki in ew EBITby10.8%largelydueto andStellaArtoiswereup40% from thenewbreweryexpected (from Australia)andforMahi tothefullyeareffectof ed intotalnetsales Appendix C 78
8 7 Lion NathanWine • • • • • Six monthsended31March2009 31 March2009issummarisedbelow: costs) forthethreeyearsended30Se The financialperformance ofLionNathan Wine (beforeunallocatedcorporate South Africa. Zealand geography,aswell asfromregionsinFrance,Italyand renowned also distributesaportfoliooffine New Zealand.ItalsoownstheArgyl South Australia,Victoria,Western Au Lion NathanWine producessome of Operating EBITDA Operating EBIT (pre SGARA) Depreciation and amortisation Lion Nathan Wine – financial performance Net sales revenue Volume (000s of9litrecases)
volumes inkeybrands. did RTDbeverageswhichwereboosted byincreased multi-pack February 2008.TheSmirnoffbrandperformed particularlywell, as more thanoffsetthelossofMoetHennesseyagencybrandsin growth. Newproductdevelopment initiativesandnewagencybrands The Wine, SpiritsandRTD beveragesbusinessachieved11%volume foreign pricedinputcosts cost increasesandthecontinued further priceincreasesarelikelyin below themarginsgenerated inAustralia). LionNathanhasstated that pressure andpartiallyrestorebeer A priceincrease wasimplemented inMarch2009 toalleviatecost Summit) up” andpremium beers(particularl benefiting from animproved salesmix asconsumersmoved to“step Domestic beer volumes wereinline a strongpresenceandtourism numbers declined caused demand tocontract,particular Beer exports declined by 1.3 million litres asmacro-economic factors and mainstream beervolume declines Volume gains inwine,spiritsand (1) 148.8 (2) (r GR) 61 97 23 7.2 22.3 19.7 16.1 (pre SGARA) (3) 1385.0 1385.0 1437.0 1473.0 775.0 wines fromwines awiderAustralianandNew 30 Sep 06 Year to A$m ptember 2008andthesixmonths ended Australasia’s finestwinesfrom e winery in Oregon, USA. The Group e wineryinOregon,USA.TheGroup stralia andtheMarlboroughregionin 64 (.) 65 (3.7) (6.5) (6.8) (6.4) . 1. 1. 3.5 15.8 12.9 9.7
negative exchangerateimpacts on margins (which aresignificantly RTD beveragesof11%offsetexport y SteinlagerPure andSpeight's 2009 torecoversignificanthistoric withprior year, withthe business ly inHawaiiwhereSteinlager has 30 Sep 07 Year to A$m 166.0
30 Sep 08 Year to A$m 175.2
Appendix C 31 Mar 09 6 mths to A$m 83.4
79
139
lion nathan limited 2009 140 lion nathan limited 2009 9 • • Year ended30September2007 • • • • • Year ended30September2006 Wine overtheaboveperiods: The following commentsrelate tothe Lion Nathan Wine – financial performance vrg rwhi e eln rc (11) .% .% (10.8%) 3.0% ml 750 bottles. adozen Being 3 2 Before unallocated corporate 1 Net of excise and discounts. 7.5% Note: $107.61 Operating EBIT growth (11.1%) $118.94 Net sales revenue growth price innet selling Average growth $115.52 Volume $107.44 litre case Operating EBIT (pre SGARA) per 9 growth litrecase revenue per 9 Net sales SGARA) 10.8% (pre EBITDA margin Operating Operating EBIT Operating SGARA (2.4)
and USmarkets continuedtoperform well.IntheUK,Bibendum Distribution ofAustralian andNew brands suchasStHallett, Wine volumegrowthof3.8%wasdr The SGARAlossinFY06wasduetolowergrape prices. Initial shipmentscommenced inAugust2006 Beam Wine Estates for th In July2006thecompany establis respectively standout performers achievingvolum owned brandsdeclined.Wither Hi The corepremium brandsin owned EBITDA margin However, difficulttradingconditions and revenues Distinguished Vineyards.Thisprovidedasignifican a jointventurebetweenTuckerSeabrookandtheLionNathanowned FY06 includesthefirstfull12months (2) (otSAA 73 01 61 2.8 16.1 10.1 7.3 (post SGARA) costs and non-recurring items. items. non-recurring and costs Wither HillsandPetaluma e distributionofpremium wineintotheUS. 30 Sep 06 Year to A$m 40 3.% 25 (55.7%) 22.5% 33.0% 54.0% 71.0% 3.8% 2.5% 3.1% 20 1.% .% (8.0%) 5.5% 11.6% 52.0% $7.00 $8.98 $10.73 $4.52 $4.52 $10.73 $8.98 $7.00 operating performance ofLionNathan
hed adistributi lls, StHallettandStonierwerethe creased volume by14%whileother Zealand premium winesintheUK iven bysolidgrowthinowned e growthat20%,29%and16% resulted inafalltheoperating 30 Sep 07 trading forFineWine Partners, Year to A$m 27 8.6% 11.9% 12.7% (2.8)
on alliancewith 30 Sep 08 Year to A$m t boosttovolumes
0.3 Appendix C
31 Mar 09 6 mths to A$m (0.7)
80
• • • • • • Six monthsended31March2009 • • • • • Year ended30September2008 • •
distributor achieveda42%increas impact onLionNathan’sabilitytomeet demand. valuations.Howeverthelowe SGARA 2009 reducedvintageyieldsacrosstheregion,negatively impacting The intenseheatandfiresinSouth achieved In Australia similar trends wereev premise consumption (reducingdemandforfinewines) trading downtocheaperwinesevidentandaswitch awayfromon- dynamicsIn theUSandUKmarket Lion Nathan totakeitswines tomarket intheUSA the nearterm,platform offersfu While theUS winedistributionbusine the newUSwinedistributionbusiness Volumes werehigherduetotheincl vagaries ofnatureandpricediscounting crisis andthestructuralwinei Key winemarketscontinuedtobe benefited thesecondhalf). vineyard management andimprove Cost reductionswerealsoachieved in Australia particular byastrongperformance by Overall winevolumes wereup2.5%,withlowerUSsalesoffsetin June 2008whichwasrenamed LionNathanUSA In responsethecompany acquireda November 2007 distributor Beam Wine Estates Sales totheUSmarket werea anticipated sales totheUS market The winebusinessincreasedEBITby22.5%despitelowerthan improved EBIT result. to improved mix) andloweroverheadsresultedinasignificantly The combination ofhigherrevenues, higher averagesellingprices(due Wither Hills andotherwine exports The strongerAUDrelativetoUSDc base) ndustry dynamics ofexcesssupply,the dversely impacted bythesaleof to Constellationbrandsin impactedbytheglobalfinancial e involumes (albeitfrom low a ident. Howevervolume growthwas d capacityutilisation(which Eastern Australiainearlycalendar ture growthpotential as itenables through efficiencyprojects,better usion ofbrandsdistributedthrough deteriorated, withconsiderable small USwinedistributorin onstrained revenuegrowthfrom the FineWines Partnersbusiness ss isexpected tobreak-evenin r yieldswere notexpectedto Appendix C 81
141
lion nathan limited 2009 142 lion nathan limited 2009 1 Trading multiplesoflistedcomparables –beer
available. –not n/a asat June 2009. 9 Multiples 2 Historical multiples forthese comp 1 Note: Hite Brewery Ltd Co Grupa Zywiec SA Asia PacificBreweries Ltd San Miguel Brewery Inc Asahi Breweries Ltd Co Coors Brewing Molson Grupo Modelo SAB de CV A/S Carlsberg Kirin Holdings Co Ltd Heineken NV Companhia - AmBev SAB MillerPlc Anheuser-Busch InBev NV International companies Coca-Cola Amatil Ltd Foster's Group Ltd companies Australian Listed companytradingmultiples the years to 31March2010 years the comparable companies isthereforelim Group) andCoca-ColaAmatil Limited beverage industry,being There are only three large listed companies operating intheAustralian out below: companies, aswelladescription ofth any othertime inhistory.Themultiple industry, withtheresultbeinganindust comparable companies. Consolidation hasbeenakeytheme intheglobalbeer have adoptedformarket referencepur are however many listed international and 2011respectively. - Enterprise 149,335 13,396 13,396 13,185 15,437 25,801 27,658 38,496 49,966 87,766 12,906 beer value A$m 2,350 2,677 2,776 3,674 8,187 anies are for theyearto 31 Marc Lion Nathan,Foster’sGroupLimited (Foster’s
Historical
FY08 10.0 15.2 10.8 15.7 7.8 9.4 7.8 6.5 7.1 9.3 8.7 9.4 8.8 9.5 9.8
EBITDA multiples (1) (1) (1) poses, inadditiontothe Australian beer producingcompanies whichwe
ited toFoster’sGroupandCCA.There s of theAustralianand international (CCA). Thelist ofAustralian ry more highlyconcentratedthanat e activities of thesecompanies, isset Forecast
FY09 10.1 10.9 10.5 9.3 7.4 n/a 8.3 6.8 6.6 8.4 8.3 7.7 8.1 9.5 8.7
(1) (1) (1)
Forecast
FY10 h 2009. Forecastsmultiples arefor 8.8 7.1 n/a 8.4 7.1 6.6 9.7 5.8 7.8 7.6 7.3 7.6 9.8 8.9 8.3
(1) (1) (1)
Historical
FY08 13.9 24.4 13.4 22.9 13.8 15.2 18.2 16.7 16.2 19.2 20.8 15.9 15.3 14.5 15.5
(1) (1) (1) Appendix D
PE multiples Forecast
FY09 13.1 10.5 18.6 13.4 13.0 13.7 17.9 14.9 19.8 12.2 14.5 15.3 14.7 14.3 n/a
(1) (1) (1)
Forecast
FY10 12.4 15.0 11.8 12.9 12.2 14.7 11.9 18.6 10.5 13.5 12.9 12.3 13.5 82 n/a 9.5
(1) (1) (1)
3 Coca-Cola AmatilLimited 2 Foster’s GroupLimited Australian companies 5 SABMiller Plc 4 Anheuser-Busch InBevNV International companies as packagedfruit. soft drinks,mineral waters,juices,bottl Papua NewGuinea.Thecompany’s portf beverages, primarily inAustraliabut anddistributesCoca-Cola CCA produces Blass andSouthcorp. Group’s wineoperationsarelargelythere significant operations inAustralia,New leader. Itswinedivision operations arefocusedontheAustralianmarket, inwhichitisthemarket alcoholic beverageswithcoreoperati Foster’s GroupisanAustralian-base Australia withCCA. beer markets andrecentlyenteredinto SABMiller isalsooneof thebottlersof Pilsner Urquell,PeroniNastro Azzur in more than60countries.Itsbrands SABMiller Plcisthe world’ssecond la company thatownstheCoronabrand. company ownsa50%shareinGrupoModeloSAB DeCV,aMexican other globalbrandssuchasStella beer brands,includingtheworld’shighest commands a48.5%marketshare.The company ownsaportfolioofover200 distributor. Thecompany’ Inc, Anheuser-BuschInBevNVistheworld’slargestbeerproducerand Formed fromtherecent merger ofIn is oneoftheworld’sbiggestwinecompanies, with s operations areweighted towardstheUSwhereit Artois andBeck’s.Inaddition,the d, globalproducerandmarketer of Bev NVandAnheuser-BuschCompanies o, MillerGenuineDraftandGrolsch. includeinternationalbeerssuchas ons inbrewingandwine.Itsbeer also inNewZealand,Indonesia,Fijiand ajoint venture to rgest brewingcompany, withinterests Coca-Colaproductsinsome ofits ed wateraswellfoodproductssuch Zealand, theUSandUK.Foster’s brandedandindependentlyowned sellingbeerBudweiser,aswell olio ofproductsincludescarbonated sult oftheacquisitionsBerringer producebeersin Appendix D 83
143
lion nathan limited 2009 144 lion nathan limited 2009 held are primarily in European countries. countries. are European primarily in held 7 Heineken NV 8 Kirin HoldingsCompany,Limited 6 Companhia deBebidasdasAmBev 68 9 Carlsberg A/S This relates to the Foster’s brand in in jurisdictions Foster’s brand This relates tothe regional, localandspecialtybeersan as thethirdlargestbrewerinwo 120 breweriesinmore than65countries.Bybeervolume thecompany ranks Heineken NVisaninternationalbeer beer market inBrazil,whereitgenerate drinks andothernon-alcoholicbeverage Kirin isthelargestJapanesebrewingco alcoholic beveragescompany. Breweries Ltd, amajor theownerofDBBreweries, NewZealandbased Strongbow, TigerandZywiec.owns a42%shareofAsiaPacific Italso America. AmBevproducesanddistribut beverage companyoperatingin14count Companhia deBebidasdasAmBev (AmBev) isaBrazil-based beer and subsequently splitoperationally between thetwo acquirers. Scottish &NewcastlePlc, amajor Europeanbeercompany, whichwas Pilsner. In2007, Carlsburg A/SandHeinekenNVsuccessfullyacquired approximately 500brandsincludingits secondary activitiesinsoftdrink Carlsberg A/S isalargeEuropeanbasedbeerbrewer andmarketer, with Farmers. Australia’s largestmilk processor, Brewery Incanda50.8%interestinMe its existing46.1%interestinLionNa and non-alcoholicbeveragesinJapan.
and waterproduction.Itoffers outside of those owned by Foster’s Group. Licenses Group. byFoster’s owned of those outside National Foods,whichincludesDairy rld, withmore than170international, d ciders,includingHeineken,Foster’s, than, a48.3%interestinSanMiguel producer withaglobalnetworkspanning Its investments outsideJapaninclude s more than two-thirds of itssales. core internationalbrand,Carlsberg mpany. Italsosellsotheralcoholic rcian Corporation. s. Ambev boastsa67%shareofthe ries inSouth, CentralandNorth es beerandrelatedproducts,soft Kirin alsoowns Appendix D 68
84
10 Grupo ModeloSABdeCV 12 Asahi BreweriesLtd 11 Molson CoorsBrewing Company 13 San MiguelBrewery Inc 14 Asia PacificBreweries Ltd Modelo. Itexportstomorethan150 brands includingCoronaExtra,ModeloEspecial,Victoria,PacificoandNegra Grupo ModeloSABdeCVisaMexicanbeerproducerwithportfolioof manufactures andmaintains alcoholst brands tobeerproducersintheUS,Eu spirits, non-alcoholicbeverages,food in 2008forA$1.2billion. Italsosellsb in Chinaand Australia.Itwasthesu Asahi BreweriesLtd isthesecondlargest portfolio. joint ventureinJanuary2008toimport theGrupoModelobeerbrand has leading market positionsinCanada the merger of MolsonIncandAdolphCoorsCoduring2004.Thecompany with distributionf beer, primarily inCanada,theUSAandUK.Itoperates18breweries, Molson CoorsBrewingCompany (MCBC)isadistributorandmarketer of Maria andNestlePurezaVital. company alsoproducesanddistributes Anheuser-Busch InBev’s(its50%sh company isthelargestbeerproducerin which werepreviouslyownedbySan San MiguelBreweryIncownsthedomestic Philippinebeerbusinessassets New Zealand. ies, thesecondlarges Heineken NV.Italsoowns DBBrewer a portfolioofover40beer brands New Zealand,Mongolia, ChinaandThaila in theAsiaPacificregion including the saleofbeerandstout.Thecompany operates30breweriesin12countries Asia PacificBreweriesLtd isaSinga owned byKirin. four brandsandholdingamarket shar acilities inmore than30countries.MCBCwasformed from (including Tiger)andis 42% ownedby Singapore, Malaysia,Papua NewGuinea, countriesandimports aselectionof ccessful bidderforSchweppesAustralia areholder) beersinMexico.The porean company engagedinbrewingand andpharmaceuticals,licences its e ofover90%.Thecompanyis48.3% Miguel Corporationpriorto2007.The orage barrelsandsalesfacilities. rope andAsia.AsahiBreweriesalso andtheUK andrecentlyestablisheda bottled waterunderthename ofSanta the Philippines,accountingfortop eer, western liquor,wineanddistilled Japanese brewer,with otherinterests nd. Asia PacificBreweriesLtdhas t beerbrewerin Appendix D 85
145
lion nathan limited 2009 146 lion nathan limited 2009 15 Grupa Zywiec SA 16 Hite Breweries CoLtd a 61%stake.Itproduces Grupa ZywiecSAisaPolishbrewingcompany whichHeinekenNVowns in Puriss. Rutherford HillRoseofMerlot andBishop,springwaterunderthename names, labelscalledKangar wine Foster’s andKirin,whiskyunderthe gin andmarkets imported beverages, Hite Breweries CoLtdis theleader in Poland isproducedbyGrupaZywiecSA. wines, vodkas,rums, tequilas,ginsandwh brands andalsodistributesmineral waters and distributesbeersunde oo RidgeCabernetSauvignon,Medoc, Kingdom, LancelotandCuttyShark including beerunderthebrandnames the Koreanbeermarket. Italsosells , juices,softdrinks,energetic iskies. Oneinthreebeerssold r theZywiecandHeineken Appendix D 86
Transaction multiples- beer 1 Transaction multiples–beer Feb 02 02 May Nov 02 Jan 03 03 May 03 May 03 May Jul 03 Sep 03 Jan 04 Jan 04 Feb 04 Apr 04 Jul 04 Jul 04 Aug 04 Aug 04 Jan 05 Jul 05 Aug 05 Jan 06 Apr 06 Aug 06 Jun 07 Nov 07 Nov 07 Apr 08 Jun 08 Apr 09 Date multiples are provided below: willing topay for acontrolling intere provides some guidanceastothepricesthatpotentialacquirersmight be and consequentlythereisasignificant The globalbeerindustryha Hartwall AbOy of Phillip Morris) Miller Brewing Co. (subsidiary Brauergilde Hannover AG Acquisition ofinterest in CCU (Centralcer) Society Cenral de Crevejas SA Getranke BeteiligungsAG Birra Peroni Industriale SpA Backus &Johnson Union deCervecerias Peruanas Franziskaner Brau KGaA Gabriel SedlmayerSpaten Brewery Co) owned 45%of Oriental Hops Cooperative (which Holsten BrauereiAG OrklaASA held by A/S-stake Breweries Carlsberg Harbin Brewery Group Ltd Molson Inc DB Breweries Ltd Sun Interbrew Ltd Americas (Ambev) Companhia deBebidas das San MiguelCorporation Bavaria SA Ivan Taranov Breweries Itb Fujian Sedrin Brewery Co. Ltd Quilmes Industrial(Quinsa) SA Sleeman Breweries Ltd Scottish and Newcastle Plc J Boag&SonPty Ltd Koninklijke Grolsch NV Eichhof Holdings AG Anheuser Busch Companies Inc Tsingtao Brewery Co Target
s beenconsolidatingstead Sapporo Holdings Ltd A/S andHeinekenNV Consortium Carlsberg Lion Nathan SABMiller Plc Heineken NV InBev NV Asahi Breweries, Ltd Acquirer Scottish & Newcastle SABMiller Plc Interbrew SA Heineken NV Plc Scottish & Newcastle Heineken NV SABMiller Plc SABMiller Plc Interbrew SA Interbrew SA GmbH Deutschland Carlsberg Carlsberg A/S Companies, Inc Anheuser Busch Adolph CoorsCo Ltd Asia Pacific Breweries Interbrew SA Interbrew SA Kirin SABMiller Plc Heineken NV Inbev NV das Americas (Ambev) Companhia deBebidas st inLionNathan. Theacquisition amount oftransactionevidencewhich acquired acquired 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 19.9 30.8 79.8 60.0 90.1 45.0 40.0 23.1 91.2 71.8 34.5 % 4.1
ily overthepast10years Consideration PHP272,492 USD62,000 USD33,518 USD16,341 GBP10,200 CAD6,228 EUR2,273 EUR1,525 EUR1,900 EUR1,547 EUR1,070 EUR1,212 USD5,622 USD7,054 USD7,805 USD3,811 AUD 325 EUR 916 CHF 290 CAD399 NZD482 EUR475 EUR828 EUR563 EUR477 EUR614 USD400 USD720 USD560 $m Appendix E (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (1)
Historical EBITDA multiples 8.9 - 9.9 13.7 14.3 18.2 16.2 12.0 16.1 14.2 10.1 11.3 10.2 12.6 10.7 10.7 16.6 11.6 10.1 11.0 11.7 10.1 14.0 13.0 10.3 9.5 8.6 9.6 8.6 8.6 9.7 87
8.8 9.0 9.4 11.8 9.9 14.1 10.0 8.4 10.3 n/a 12.4 Forecast n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 147
lion nathan limited 2009 148 lion nathan limited 2009 Simple average Apr 98 Mar 00 Jun 00 Aug 01 Jan 05 Dec 01 Date Transaction multiples- beer n/a – not available. 2 Price implied for 100%. Basedon enterprise valueofthe target. 1 Note: High Low Median Target Lion Nathan Limited Groupe Danone) Kronenbourg (subsidiary of Ltd Brewers Bass Brauerei Beck & Co. San MiguelCorporation Carling Brewers Limited
Kirin Plc Scottish & Newcastle Interbrew SA Interbrew SA Kirin Adolph CorrsCo Plc Acquirer
acquired 100.0 100.0 100.0 100.0 45.0 15.0 %
Consideration PHP231,925 NZD4,293 EUR2,744 EUR1,790 GBP2,300 GBP1,200 $m Appendix E (2) (2) (1)
Historical EBITDA multiples 18.2 11.2 11.7 10.6 11.3 13.0 12.2 8.6 9.7 8.8 88
14.1 8.4 10.0 10.4 n/a Forecast n/a n/a n/a n/a n/a
1 Trading multiplesoflisted comparables –wine 3 Vina ConchayToroSA 2 Constellation BrandsInc After yearsofpoorinvestment re products reachcustomers in120countries. producing andbottlingfacilities andawine integrated, withitsown vineyards (with7,800hectarescultivated), wine of theleadingwinecompanies world-wide.Thecompany isvertically Vina ConchayToroSAisChile’sla wine segment represented53.5%ofsales. the UKandAustralia.In thelatest fi other alcoholicbeverages.Itsopera by volume. Itswineportfolioiscomplemented byspirits,imported beersand Constellation BrandsInc istheworld’s companies, issetoutbelow: international companies, aswella European winemaking countries.The mu more similarities toAustralianwine producers (i.e.locatedinNew therefore lookedforcompaniesoperating consolidation, therearefew pure wineco available. –not n/a asat June 2009. 9 Multiples 2 yearto isfor the Inc 28 Brands February 2009. forConstellation multiple The historical 1 Note: Ltd Vineyards BayMarlborough Oyster Vinedos Emiliana SA Australian VintageLtd Andrew Peller Ltd Delegat’s Group Ltd Vina Santa Rita SA Vina Concha y Toro SA Inc Brands Constellation multiples-wine trading Listed company Forecasts multiples are forth e yearsto28 February 20 Enterprise value A$m 2,057 9,315 324 413 129 190 280 32 turns followingawaveofglobal
tions arecentredaroundtheUS,Canada, producers thaninthetraditional rgest wineproducerandexporterone
nancial yearConstellationBrandsInc’s description of theactivities of these Historical largest producerandmarketer ofwines EBITDA multiples FY08 Zealand, Chile,USetc),astheyshare 10.8 13.8 22.2 mpanies listed ontheASX.We have overseas thatare“newworld”wine 7.1 9.0 5.0 6.9 8.6 ltiples oftheAustralianandselected distributionnetworkinChile. Its
10 and10 2011respectively. n/a n/a Forecast n/a n/a n/a FY09
6.2 8.0 9.3
Historical n/a FY08
10.8 29.6 21.0 19.5 PE multiples 7.6 4.4 9.5 Appendix F
n/a Forecast n/a n/a n/a FY09
18.2 13.7 8.4 8.0 89
149
lion nathan limited 2009 150 lion nathan limited 2009 9 Oyster BayMarlboroughVineyardsLtd 8 Vinedos EmilianaSA 7 Australian VintageLtd 6 Andrew PellerLtd 5 Delegat’s GroupLimited 4 Vina SantaRitaSA
Marlborough regionwith 535productivehectaresofland. three vineyardslocatedinthe in NewZealand.Thecompanyowns Oyster BayMarlboroughVine varieties includecabernet,sauvi Europe andAsia,withmostexportsdes are soldinsome 40countriesthroug Vinedos EmilianaSAisaChileanwinepr New Zealanddestinationmarkets. wine isexportedtoover30countries, marketing, vineyardmanagement anddevelopment. Bothbottledandbulk integrated wine company withoperationsspanningwinemaking, wine Australian VintageLtd(formerly McGuig Granville Islandbrand. vineyards aroundtheworld.Andrew Pelle Peninsula, British Columbia's OkanaganandSimilkameen Valleys,andfrom company sellswinesproducedfrom grapesgrown inOntario's Niagara Andrew PellerLtdisaproducerand enjoyed successintheAust internationally acclaimed Delegat's andOysterBaywines,whichhave New Zealandwinesforexportanddomestic Delegat's GroupLimited isalead shareholder isCristaleriasdeCh distributes over120brandstomore than70countriesworldwide. Itsmajority vineyards comprisemore than2,500 Vina SantaRitaSAisaChile-based ralian market recently. yards Ltdisengagedintheproductionofgrapes gnon, merlot aswellchardonnay. ile SA whoholdsa55%interest. ing producerofPremium branded wineproducerand hout NorthAmerica, SouthAmerica, marketer ofwinesinCanada.The hectares oflandandthecompany with aprimaryfocusontheUK,USand tined fortheUS.Thecompany’s wine an Simeon WinesLimited) isafully oducer anddistributor.Itsproducts r alsomarkets craftbeerunderthe markets. Its brandsincludethe distributor. Its Appendix F 90
1 Transaction multiples-wine
be willingtopayfor100%of transactions providesome guidanceas recent yearsinvolvingbusinesses opera There havebeenanumber ofAustralian u 0 eigrBasWn Fse’ ru U$,8 1. 12.0 n/a 14.0 n/a 12.9 US$1,585 n/a 10.8 n/a not available. Based on future maintainable EBITDA and EBIT assessed by the independent expert. 2 value. Enterprise US$142 1 4.9 8.6 n/a Foster’s Group PacificPartners Wine Note: BeringerBlass Wine US$111 GBP135 CA$47 Aug 00 Blacktone Winery n/a Vincor01Oct International Mondavi 12.5 TheWineGroup Oct 04 Chalone Andres Wines 12.2 Dec 04 RatosAB 13.8 GoldenState Vitners n/a Western Wines Apr 04 US$1,436 Jul 04 21.4 US$889 Cascadia Brands Constellation Brands Arcus-Gruppen May 05 Constellation NZ$1,334 Brands Jul 05 n/a VincorInternational Apr 06 Beam Wine Estates Dec 07 Domecq Allied Southcorp Southcorp 9.6 International LionNathan Cuppa Cup Vineyards June 99 RosemountEstates Group Montana Feb 01 63 01 Jul McGuigan Banksia Wines Sept 01 Pipers Brook Vincor International Oct 01 Petaluma Oct 01 Simeon Wines Feb 02 Goundry Wines Oct 02 Cranswick Jan 03 Date multiples -wine Transaction Dec 07 Australian Commercial Australian Dec 07 Australasia a 3 BRL Hardy HessGroup Jan 03 PeterLehmann Wines Sept 03 Southcorp Jan 05 Wines Target Target Lion Nathan’swinedivision: Wines Cockatoo Ridge Acquirer otrsGop ,2 1. 15.3 15.8 3,522 Foster’s Group Diageo & rgigr 5 65 n/a 16.5 45 G&C Kreglinger Constellation Brands US$1,314 15.4 n/a n/a 15.4 US$1,314 Brands Constellation Evans & Tate oselto rns ,4 1. 13.8 14.3 2,448 Constellation Brands Lion Nathan to thepricespotentialacquirersmight ting inthe wineindustry.These andglobalrecenttransactionsin Consideration O80 . n/a 6.9 NOK820 S201. 12.8 US$200 14.3 34-48 n/a 3.2-4.5 ,9 1. 12.2 16.4 1,490 3 85 n/a 8.5 339 0 1. 14.2 15.1 106 7 1. n/a 19.5 176 7 1. n/a 17.3 274 0 2. 14.9 25.1 101 $m 8 51 n/a 15.1 48 (1) Appendix G Historical EBITDA multiple Forecast 91
(2) (2) (2)
151
lion nathan limited 2009 152 lion nathan limited 2009 IER EBITDA Lion Nathan Senji Miyake LEA Kirin Nominee Directors Dir Kirin Independent Directors IBISWorld IBC Heineken GDP FY FSG Foster’s Group FOS EPS EBITA EBIT DCF oprtosAt CorporationsAct(2001)(Cth) 8oftheCorporationsRegulations2001 Part3ofSchedule CPI Corporations Regulations Corporations Act CCA Cash Payments Therelatedtax(which CAGR Boag’s ASX Alcopops Tax IR Australianequivalent to AustralianCompetition and Consumer Commission AustralianBureau ofStatistics TheImplementation Agreement betweenLionNathanand ASIC AIFRS Agreement ACCC ABS Abbreviation Glossary
Kirin HoldingsCompany, Limited IBISWorld PtyLimited, anAustralianindustryand A$12.00pershare,co JBoag&Son
Independentexpert’sreport LionNathanLimited Independent BoardCommittee FinancialServicesGuide Foster’sGroupLimited Earningspershare Earningsbefore interestandtax Grossdomestic product Discountedcashflow Compound annualgrowth rate AustralianSecurities &Investments Commission Lonergan Edwards &AssociatesLimited FinancialOmbudsman ServicesLimited Earningsbefore in AustralianSecurities Exchange Coca-ColaAmatil Limited Earningsbefore interest Heineken economic researchcompany Directors per share A$11.50 pershareplusaSpecialDividendofA$0.50cash Standards labelled the‘alcopops’tax Kirin dated10May2009in Definition Financial Consumer ectors ofLionNathan,otherthantheKirinNominee year NV price , HirotakeKobayashiand Fumio Miki index terest, taxandamortisation mprising Scheme Considerationof is yettobepassedintheSenate) , tax,depreciationandamortisation InternationalFinancialReporting relation totheScheme Appendix H 92
LNI LionNathanshar Lion Nathanshareholders Abbreviation PE OIO NZSE NZCC NPV NPAT MAT LWB Low-carb pca iied DividendofA$0.50perLionNathanshare A$11.50perLionNathanshare Trust Special Dividend Scheme Consideration RTD US UK Scheme VWAP Woolworths WET Wesfarmers LionNathanAchievement RightsTrust
LittleWorld BeveragesLimited LionNathanInternational Thescheme ofarrangementbetweenLionNathanandits OverseasInvestment Office Movingannualtotal NewZealandStockExchange NewZealandCo Volume weightedaverageprice Netprofit after tax bodies corporate Definition corporate) shareholders (otherthan Wesfarmers Price Low-carbohydrate United United Woolworths Ready-to-drink Net Wine present earnings equalisation Kingdom States value Limited Limited Limited mmerce Commission eholders otherthan
tax Kirin anditsrelatedbodies Kirin anditsrelated Appendix H 93
153
lion nathan limited 2009 lion nathan SCHEME BOOKLET 2009
Annexure E - Lion Nathan’s ASX Announcements from 31 March 2009
LIST OF LION NATHAN ANNOUNCEMENTS FROM 31 MARCH 2009
The information in this Annexure E has been provided by Lion Nathan and Lion Nathan is responsible for its accuracy.
The following table lists announcements on Lion Nathan’s ASX platform since 31 March 2009.
Date Announcement
24 July 2009 Change in substantial holding
16 July 2009 Scheme update and Lion Nathan third quarter trading results
6 July 2009 Becoming a substantial holder
29 June 2009 Lion Nathan and Kirin receive ACCC Clearance
29 June 2009 Ceasing to be a substantial holder
26 June 2009 Becoming a substantial holder
19 June 2009 Kirin Receives FIRB Approval
29 May 2009 Lion Nathan Chairman’s Letter and Interim Report 2009
20 May 2009 Lion Nathan Interim Results 2009 Analyst Pack
20 May 2009 Appendix 4D limite d 2009 20 May 2009 Lion Nathan Statutory Interim Results
11 May 2009 Lion Nathan and Kirin Sign Implementation Agreement nathan
7 May 2009 Trading Halt lion
154 4 May 2009 Update on discussions between Lion Nathan and Kirin
27 April 2009 Lion Nathan and Kirin Agree Key Terms
24 April 2009 Lion Nathan Preliminary Half Year Trading Results
23 April 2009 Trading Halt
2 April 2009 Appendix 3X Appendix 3Z
31 March 2009 Fitch raises Lion Nathan credit rating LION NATHAN SCHEME BOOKLET 2009
Annexure F - Notice of Court Ordered Meeting of Shareholders of Lion Nathan
NOTICE OF SCHEME MEETING
Lion Nathan Limited
ABN 34 093 160 448
Notice is hereby given that by an order of the Federal Court of Australia made on 5 August 2009 pursuant to section 411(1) of the Corporations Act 2001 (Cwlth) (“Corporations Act”) a meeting of the holders of ordinary shares in Lion Nathan Limited ABN 34 093 160 448 (“Lion Nathan”) (other than Kirin Holdings Company, Limited and its Related Bodies Corporate) will be held at the Grand Ballroom, Hilton Sydney, 488 George Street, Sydney on 17 September 2009 at 10.00am (Sydney time).
Business of the meeting
Resolution
To consider, and if thought fit, to pass the following resolution in accordance with section 411(4)(a)(ii) of the Corporations Act:
“That, in accordance with the provisions of section 411 of the Corporations Act 2001 (Cwlth), the arrangement proposed between Lion Nathan Limited (Lion Nathan) and the holders of its fully paid ordinary shares (Scheme) (other than Kirin Holdings Company, Limited and its Related Bodies Corporate), as contained in and more particularly described in the Scheme Booklet accompanying the notice convening this meeting, is agreed to and the directors of Lion Nathan are authorised to agree to such alterations or conditions as are thought fit by the Court and, subject to approval of the Scheme by the Court, the board of directors of Lion Nathan is authorised to implement the Scheme with any such modifications or conditions.”
By order of the Court
Duncan Makeig limite d 2009 Company Secretary 6 August 2009 nathan lion
155 lion nathan SCHEME BOOKLET 2009
Annexure F - Notice of Court Ordered Meeting of Shareholders of Lion Nathan continued
Explanatory Notes •• mail the completed proxy form to Computershare Investor Services Pty Limited using the reply paid envelope; These notes should be read in conjunction with this Notice of Scheme Meeting. •• fax the completed proxy form to Computershare Investor Services Pty Limited on 1800 783 447 (within Australia) or Terminology +61 3 9473 2555 (outside Australia); or Capitalised terms which are defined in section 7.1 of the Scheme •• sent electronically via the internet, by visiting Booklet which accompanies this Notice of Scheme Meeting have www.lion-nathan.com and clicking on the “Scheme the same meaning when used in this notice (including these Proxy Voting” icon. notes) unless the context requires otherwise. Proxy forms (together with any power of attorney or authority Chairperson under which the proxy form is signed) must be received no later The Court has directed that Geoff Ricketts act as Chairperson than 10.00am on 15 September 2009. Proxy forms received of the Scheme Meeting or, failing him, Duncan Makeig (unless the after this time will be invalid. members at the meeting elect some other person to act as Further directions for the proper completion of proxy forms are Chairperson of the meeting) and has directed the Chairperson printed on the proxy form. to report the result of the meeting to the Court. A vote given in accordance with the terms of a proxy is valid Majority required despite the revocation of the proxy, unless notice in writing In accordance with section 411(4)(a)(ii) of the Corporations Act, of the revocation has been received by Computershare the resolution contained in this Notice of Scheme Meeting must Investor Services Pty Limited by 10.00am (Sydney time) on be passed by: 15 September 2009.
(a) unless the Court orders otherwise, a majority in number of A proxy will be admitted to the Scheme Meeting and given those Shareholders present and voting (either in person, by a voting card upon providing, at the point of entry to the proxy or (in the case of corporate Shareholders) by a Scheme Meeting, written evidence of their name and address. corporate representative) at the Scheme Meeting; and The sending of a proxy form will not preclude a Shareholder from attending in person and voting at the Scheme Meeting. (b) at least 75% of the votes cast on the resolution contained However, the Corporations Act specifies that the presence of in this Notice of Scheme Meeting. a Shareholder at a meeting suspends his or her proxy’s rights
limite d 2009 The vote will be conducted by poll. to speak and vote.
Entitlement to vote Jointly held securities
nathan The Court has ordered that, for the purposes of the Scheme If the Shares are jointly held, only one of the joint Shareholders Meeting, Shares will be taken to be held by the persons is entitled to vote. If more than one joint Shareholder votes, only
lion who are registered as Non-Kirin Shareholders at 7.00pm the vote of the Shareholder whose name appears first in the (Sydney time) on 15 September 2009. Accordingly, registrable Register will be counted. 156 transmission applications or transfers registered after this time Voting by attorney will be disregarded in determining entitlements to vote at the Scheme Meeting. A Shareholder entitled to attend and vote at the Scheme Meeting may appoint an attorney to vote at the Scheme Meeting. Voting in person Persons who are attending as an attorney, should bring the To vote in person at the Scheme Meeting, you must attend the original or a certified copy of the power of attorney to the Scheme Meeting to be held at 10.00am on 17 September 2009 at Scheme Meeting, unless Lion Nathan has already noted it. the Grand Ballroom, Hilton Sydney, 488 George Street, Sydney. Voting by corporate representative You will be admitted to the Scheme Meeting and given a voting card upon disclosure at the point of entry of your To vote at the Scheme Meeting a corporation who is a name and address. Shareholder, or who has been appointed as a proxy by a Shareholder, may appoint a person to act as its representative. Voting by proxy Persons who are attending as a corporate representative A Shareholder entitled to attend and vote at the Scheme for a corporation must bring evidence of their appointment. Meeting is entitled to appoint not more than two proxies to The appointment must comply with section 250D of the attend, who need not be Shareholders. Each proxy will have Corporations Act. An authorised corporate representative will the right to vote on the poll and also to speak at the Scheme be admitted to the Scheme Meeting and given a voting card upon Meeting. Where more than one proxy is appointed, each proxy providing, at the point of entry to the Scheme Meeting, written should be appointed to represent a specified percentage or evidence of their appointment including any authority under specified number of the Shareholder’s voting rights. If the which it is signed, their name and address and the identity of appointments do not specify the percentage or number of votes their appointer. that each proxy may exercise, each proxy may exercise half the votes. Fractions of votes will be disregarded. A pro forma “Certificate of Appointment of Corporate Representative” may be obtained from the Registry. Your personalised proxy form accompanies this notice. Court approval Proxy forms may be lodged as follows: If the resolution contained in this Notice of Scheme Meeting is •• deliver the completed proxy form to Registry at approved at the Scheme Meeting by the Requisite Majorities, the Computershare Investor Services Pty Limited, Level 2, implementation of the Scheme (with or without modification) will 60 Carrington Street, Sydney NSW 2000; be subject to among other things the subsequent approval of the Court. Lion Nathan Limited Booklet Scheme
The Independent Directors unanimously recommend that you VOTE IN FAVOUR of the Scheme, in the absence of a Superior Proposal.
www.lion-nathan.com THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. FINANCIAL ADVISER LEGAL ADVISER YOU SHOULD READ IT IN ITS ENTIRETY PRIOR TO DECIDING WHETHER OR NOT TO VOTE IN FAVOUR OF THE SCHEME. IF YOU ARE IN DOUBT AS TO WHAT YOU SHOULD DO, YOU SHOULD CONSULT YOUR LEGAL, INVESTMENT OR OTHER PROFESSIONAL ADVISER. LION NATHAN LIMITED ACN 093 160 448