Asahi says it paid too much for PE-backed Independent Liquor

"We felt there was a gap between the price that we paid and the actual value of the company," said a representative from the Japanese drinks giant, the Financial Times reported. "We are in the process of verifying the price." Should Asahi identify discrepancies, compensation claims could follow.

In August 2011, the Japanese firm's Australian subsidiary agreed to buy all outstanding shares in Independent Liquor's parent. The deal valued the beverage producer 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 last September.

PEP and Unitas secured a 1.5x return on their original NZ$1.2 billion investment, made in 2006. Each firm owned 43.9% of Independent Liquor, with a further 11.75% held by the widow of the company's founder, who made NZ$179 million from the sale.

Assessments of Independent Liquor's business are potentially complicated by ongoing difficulties in the Australia and New Zealand ready-to-drink (RTD) alcoholic beverages market, which saw the company fall short of its targets in the first quarter of 2012.

Independent Liquor 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. PEP and Unitas brought in new management in 2009 in a bid to turn the business around and this led to a number of unprofitable brands being jettisoned.

However, weak consumer sentiment in both markets has not helped performance. Independent Liquor posted revenues of NZ$414.4 million in 2010 but still made a loss of NZ$22.7 million.

Japanese companies have become increasingly active in outbound M&A, with beverage players like Asahi, Suntory and Kirin coming to the fore. This is driven by a combination of declining domestic markets - beer shipment volumes have fallen 15% in the last decade as Japan's population ages and its economy remains stagnant - low borrowing costs and a favorable exchange rate.

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