By Sonali Paul
MELBOURNE, Nov 17 (Reuters) - Lion Nathan Ltd, Australia's second-largest brewer, launched a A$7.6 billion ($4.9 billion) takeover bid for soft drinks group Coca-Cola Amatil on Monday, seeking a tonic to slowing beer sales.
The cash and stock bid, pitched at a 25 percent premium to Coca-Cola Amatil's share price, sent the target's shares soaring 45 percent to a life high, but Coca-Cola Amatil said the offer had material weaknesses and looked cheap, based on recent deals.
"CCL is definitely not too happy with it. So obviously there is still a risk that the whole deal doesn't go through," said Theo Maas, a partner at Fortis Investment Partners, which manages A$5 billion, including Lion Nathan shares.
A takeover of Coca-Cola Amatil, 30 percent-owned by U.S.-based The Coca-Cola Company, would give Lion Nathan a 60 percent share of Australia's A$10.3 billion soft drinks market as well as a canned fruits and vegetables business.
"Lion Nathan believes the proposed combination would create significant benefits for shareholders of Coca-Cola Amatil and Lion Nathan, as well as other partners including The Coca-Cola Company," the bidder said in a statement.
Lion Nathan, 46 percent-owned by Japan's Kirin Brewery Co , forecast annual synergy benefits of A$100-A$130 million from a successful takeover. It said it secured A$800 million debt required for the transaction.
The move marks the latest surge in a wave of consolidation among global brewers, as Coca-Cola Amatil also has a beer joint venture, Pacific Beverages, with SAB Miller Plc, selling Peroni Nastro Azzurro and Miller Genuine Draft.
North American brewer Molson Coors Brewing Co this month emerged as holder of a 5 percent interest in Lion Nathan's bigger rival, Foster's Group Ltd.
And Belgium's InBev NV is set to become the world's biggest brewer with a $52 billion takeover of Anheuser-Bush Cos Inc.
RISKS TO DEAL
Coca-Cola Amatil's shares rocketed to a high of A$12, before easing to trade up 16.4 percent at A$9.60.
Maas at Fortis added that Lion Nathan had room to improve its offer because its shares were trading on a higher earnings multiple than reflected in the offer.
"In particular, the pricing multiple proposed is materially below recent multiples paid for domestic and international beverage companies and the board can give no assurance that the proposal will proceed or will be supported by the board or its major supplier, the Coca-Cola Company," Coca-Cola Amatil said.
Shares in Lion Nathan dipped 0.5 percent to A$8.91, valuing the group at around A$4.8 billion.
Coca-Cola Amatil is being advised by Macquarie Capital Advisers. JP Morgan is advising Kirin, a banker familiar with the transaction told Reuters.
Lion Nathan's move took the market by surprise, as focus has been on Coca-Cola Amatil's expansion plans and Australian drinks giant Foster's, which is trying to decide what to do with its troubled wine business, the world's second largest.
"Obviously everyone has been looking at combinations of Coke and Foster's. So this has come a bit out of the blue," Maas said.
Both Lion Nathan and Coca-Cola Amatil have been looking for acquisitions as growth slows.
Coca-Cola Amatil recently missed out on buying the Frucor beverages business in Australia and New Zealand, sold by France's Groupe Danone, and has said it was interested in Britain's Cadbury Plc's Australian Schweppes business.
Kirin has also been expanding in Australia as its home beer market shrinks. Last week, it sealed a A$910 million deal to buy milk co-operative Dairy Farmers through its National Foods arm.
Under Lion Nathan's proposal, Coca-Cola Amatil shareholders would receive A$6.15 in cash plus 0.469 Lion shares for each Coca-Cola Amatil share, which, based on last Friday's close, valued CC Amatil at A$10.35 a share.
At that price, the offer values Coca-Amatil at 17.6 times forecast 2009 earnings, well above Coca-Cola Co, trading at 14.5 and Dr Pepper Snapple Group Inc, recently spun off by Britain's Cadbury, which trades at 9.6 times.
($1=A$1.56)
(Additional reporting by Denny Thomas, Editing by Dhara Ranasinghe and Ian Geoghegan) Keywords: CCAMATIL/LIONNATHAN . Keywords: CCAMATIL/LIONNATHAN . Keywords: CCAMATIL/LIONNATHAN
(sonali.paul@reuters.com; +61 3 9286 1419; Reuters Messaging: sonali.paul.reuters.com@reuters.net)
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