I belive they can buy but can't dispose of the shares until their proportianal bid lapses or is met. (could be wrong).
Also thought some might be interested in this link...
http://www.takeovers.gov.au/content/Resources/cslrc/cslrc_report_no_2.aspx
So i would be surprised if Lion does not buy on market up to 2c in the short term and then dependant on takeup from shareholders extend there bid by upping it - just one scenario of many I guess
