Asahi, PE firms set for legal battle over Independent Liquor sale - update

Asahi alleges that PEP and Unitas inflated the earnings of Independent Liquor New Zealand. Independent Liquor and Asahi Holdings Australia, Japanese-registered subsidiaries of Asahi Group, are seeking unspecified damages for losses after an internal investigation uncovered what the company claims was misleading and deceptive conduct.

"We conducted due diligence thoroughly and in good faith and relied on the figures provided to us, we are seeking maximum recovery of our loss and we have commenced legal proceedings for this purpose," Asahi Holdings Australia Managing Director Atsushi Katsuki told Reuters.

PEP and Unitas said in a joint statement that the allegations are "completely untrue and unfounded," noting that Asahi had full access to information and management during a three-month due diligence process. The firms intend to institute legal proceedings of their own in the New Zealand courts.

Asahi acquired Flavoured Beverage Group Holdings, the parent company of Independent Liquor, from PEP and Unitas at a time when Japanese beverage companies were on a spending spree across Asia and Oceania, looking to boost revenue growth in the face of a shrinking domestic market.

It was a competitive auction process, with Asahi's domestic rivals Kirin and Suntory also said to have submitted bids. The deal valued Independent Liquor at 13x EBITDA, broadly comparable to the 12.5x valuations of Kirin's A$3.3 billion buyout of Australia's Lion Nathan in 2009 and SABMiller's A$9.9 billion purchase of Foster's in September 2012.

In buying Independent Liquor, Asahi took ownership of well-known brands including Woodstock Bourbon and Vodka Cruiser. However, it gained a foothold in the Australasian market at a time of considerable uncertainty for the ready-to-drink (RTD) alcoholic beverages business that accounts for much of Independent Liquor's revenue.

The company relies on Australia for 60% of its sales and was hit hard by a 70% tax hike on pre-mixed alcoholic drinks in April 2008. New Zealand subsequently introduced legislation to limit the alcohol content of RTD beverages. Independent Liquor fell short of its performance targets in the first quarter of 2012.

Asahi publically stated that it thought it had paid too much for the asset as early as May last year. It suggested there was a difference in understanding between the buyer and sellers over the value of assets on the balance sheet.

The company posted a net profit of JPY57.18 billion ($611 million) in 2012, largely thanks to its recent overseas acquisitions, but it also logged a one-time charge of JPY8 billion to cover losses on the Independent Liquor deal.

 

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• Topics
• North Asia
• Consumer
• Regulation
• Australasia
• Exits
• Japan
• New Zealand
• Australia
• Pacific Equity Partners
• Unitas Capital
• Consumer
• Exit