Asahi accuses Independent Liquor of ‘channel stuffing’

The allegations were made in the Japanese beverage giant's Australian court filing which seeks unspecified damages from the private equity firms for misleading and deceptive conduct. PEP and Unitas sold the New Zealand drinks company to Asahi for NZ$1.5 billion ($1.5 billion) in 2011 - a price it feels didn't reflect the actual value of the business.

The private equity firms have dismissed the allegations as "completely untrue and unfounded" and plan to take legal action against Asahi through the New Zealand courts.

The court filing claims that Independent Liquor provided incentives to customers to bring forward purchases that would otherwise have fallen in later accounting periods, pushing up the company's EBITDA figures. Asahi also alleges that discounts awarded to retailers who bought large amounts of stock and expenses for bad debts were incorrectly excluded from EBITDA.

The cumulative effect was that Independent Liquor's EBITDA for the 12 months ended May 2011 was NZ$92 million, not NZ$115.6 million, which meant earnings were in declining rather than growing around the time of the sale. The filing cites an email sent by Peter Murphy, former CEO of the company, to directors at PEP and Unitas that suggests Asahi didn't see some earnings figures.

The private equity firms maintain that Asahi had full access to information and management during a three-month due diligence process.

The 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 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.

However, Australia and New Zealand had both taken legislative action - tax hikes and alcohol content limits - against ready-to-drink (RTD) alcoholic beverages as part of efforts to curb binge drinking. Independent Liquor relies on RTD beverages for a significant portion of its revenues and so inevitably took a hit, as did its competitors.

Asahi 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.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

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