Domecq turns spotlight on Southcorp

THE dust has settled on the colourful tussle for

But what of the other much-rumoured takeover candidate in the same sector, the wounded giant that is Southcorp?

Shares in the owner of the Lindemans, Rosemount Estate and Penfolds labels dropped on Tuesday after the company said there would be no dividend this year.

The stock dipped two cents to A$3.22, valuing the company at about A$2.4bn (£995m). That is well north of the shares' year-low of A$2.63 in May but still shy of the A$5.80 Southcorp commanded a year before that.

Southcorp's woes can be traced to a botched expansion plan, principally in Britain. Heavy discounting eroded margins in a strategy that proved both costly and unsustainable.

The winemaker posted a loss last year of A$923m and its chief executive and other senior managers were ousted. The new chief, John Ballard, struck a decidedly cautious tone at the annual general meeting, reinforcing fears that repairing the damage will take time.

'We will put this company back on track where it is profitable and providesa good return to shareholders,' Ballard said while also dismissing takeover talk.

Domecq has been linked with Southcorp before. The company acknowledges it would like to add an Aussie winery to its stable, and there are not that many viable candidates.

One bout of Domecq-Southcorp takeover speculation flared last February, with a Domecq adviser reportedly saying that putting the two together was 'rational speculation'. At that stage Domecq declined to comment.

In the wake of its PLW defeat, Domecq has restated its belief that its cabinet is lacking decent plonk from Down Under. 'Australia is a gap but the wine companies have been overpriced,' a spokeswoman said as it withdrew its PLW offer.

Given all this, Southcorp may just be one to watch, but a bid would not be easy. The Oatley family control close to 20% and are regarded as critical to the success any move.

The wider Australian market was stronger, supported by miners which were lifted by Wall Street's gains and by playing catch-up with their London levels.

BHP Billiton - the target of an upgrade from Smith Barney - jumped 37 cents or 3.2% to A$11.79 and Rio Tinto put on 93 cents or 2.7% to A$36.05. The All Ordinaries index ended up 8.6 at 3291.6.

Japan got back to business with a roar after a one-day break. Banks were winners, buoyed by continued hopes for a domestic economic recovery. UFJ firmed 21,000 yen to 569,000 yen while Mizuho Financial rose 7000 yen to 326,000 yen.

Technology stocks were in favour after better-than-expected sales from US phonemaker Motorola. Advantest soared 360 yen or 4.7% to 8,080 yen, and Tokyo Electron jumped 410 yen or 5.4% to 8,000 yen. The Nikkei 225 Average closed up 180.39 points at 10,966.43.

Motorola's numbers also gave a lift to South Korea. Chip giant Samsung Electronics strode ahead 8500 won to 453,500 won. The Korea Composite index rose 11.12 points, or 1.5%, to 768.14.