Asahi in $175m settlement with PE firms over Independent Liquor
Asahi has received NZ$220 million ($175 million) from Pacific Equity Partners (PEP) and Unitas Capital in a settlement that brings to a close their dispute over the sale of New Zealand beverage producer Independent Liquor.
An apparent breakthrough in negotiations came on the first day of scheduled hearings in late October and the judge adjourned the case to allow the parties to formalize a deal. Asahi said in a statement that proceedings it brought against the PE firms for breach of Australian Consumer Law - plus a claim against the insurers - was settled on November 17.
There is also a series of counterclaims involving other groups that have yet to be resolved.
Asahi bought Independent Liquor from PEP and Unitas in 2011 for NZ$1.5 billion ($1.5 billion) but then sought damages from the private equity firms, claiming they had overstated the portfolio company's earnings by more than 30% ahead of the sale. It said PEP and Unitas had resorted to "channel stuffing" to artificially inflate earnings and also withheld information about declining earnings.
The PE firms dismissed the allegations as untrue and unfounded. They filed a cross claim against two senior Asahi executives in Australasia, saying that they were directly involved in the preparation of the earnings estimates being questioned.
The Independent Liquor sale was run as an auction, 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 deals involving Lion Nathan and Foster's.
However, Independent Liquor's prospects were damaged by tax hikes and alcohol content limits imposed in Australia and New Zealand against ready-to-drink (RTD) alcoholic beverages as part of efforts to curb binge drinking. The company relies on RTD beverages for a significant portion of its revenues.
Asahi logged a one-time charge of JPY8 billion ($78 million) in its 2012 annual report to cover losses on the Independent Liquor deal.
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