Food & Beverage
Asahi Sues Buyout Firms Over $1.3 Billion Liquor Takeover
Asahi is alleging that Pacific Equity Partners and Unitas Capital inflated Independent Liquor's earnings before Asahi took over the company
Asahi Group Holdings Ltd., the Japanese brewer of Super Dry, sued two buyout firms that sold it a New Zealand liquor distributor in 2011 for NZ$1.53 billion ($1.3 billion), claiming it was given false information about the company’s finances.
Pacific Equity Partners Pty. and Unitas Capital Pte. engaged in misleading and deceptive conduct by inflating Independent Liquor’s earnings ahead of the takeover, Asahi said. The lawsuit was filed in Federal Court in Melbourne.
“We are seeking maximum recovery of our loss,” Atsushi Katsuki, managing director of Asahi’s Australian unit, said in a statement today, without elaborating on the damages sought. “We conducted due diligence thoroughly and in good faith and relied on the figures provided to us.”
Asahi’s damage in the transaction is the difference between the sum it paid for the company and the real value of Independent Liquor on Sept. 30, 2011, the Japanese company said in its statement of claim. Further particulars of loss and damage will be provided after an examination of evidence and interviews, Asahi said.
Asahi also sued to recover NZ$1.5 million of NZ$16.5 million in management fees paid to Pacific Equity and Unitas, based on what Asahi said were inflated figures for the target’s earnings before interest, tax, depreciation and amortization, or Ebitda. Asahi also sued directors at Pacific Equity, Unitas and Independent Liquor claiming they breached their duties.
The claims are “completely untrue and unfounded,” Pacific Equity and Unitas said in an e-mailed statement today.
“Asahi and its team of expert advisers were given full access to information and management during a three-month due diligence process,” the buyout firms said.
Pacific Equity and Unitas plan to file a countersuit for breach of contract and seek unspecified damages, the firms said.
Asahi shares rose 5.8 percent, the most since May 18, 2011, to close at 2,125 yen in Tokyo. The company yesterday forecast a 54 percent boost in its dividend this year. Asahi’s largest-ever takeover was part of a strategy of pursuing overseas acquisitions as a shrinking domestic population hurts demand for beer and soft drinks.
Asahi, based in Tokyo, reported annual profit of 57.2 billion yen ($613 million) yesterday, missing its own forecast of 65 billion yen in net income.
Independent Liquor, founded by University of California, Berkeley math student Michael Erceg in 1987, is New Zealand’s largest distributor of packaged cocktails, according to the company’s website. It distributes brands including Stolichnaya vodka, NZ Pure lager, and the Vodka Cruiser line of premixed drinks, according to the site.
Pacific Equity and Unitas each held 43.9 percent stakes in Independent, which they’d bought for NZ$1.2 billion in 2006, according to a statement issued at the time of the acquisition. The buyout firms acquired the distributor following Erceg’s death in a helicopter accident.
The buyout groups misled Asahi by “significantly inflating the Ebitda during the sale process and Asahi’s due diligence,” the Japanese company said in an e-mailed statement.
The sellers projected Ebitda of NZ$112 million to NZ$113 million for the 12 months ending March 2011, which turned out to be NZ$93 million, according to the statement of claim. Ebitda forecasts for the year ending in June 2011 were NZ$117.4 million to NZ$118 million compared with the actual NZ$92 million, Asahi said.
The Ebitda trend “was not one of growth, but one of decline,” the complainants said.
Independent Liquor, registered as Flavoured Beverages Group Holdings Ltd., included sales of goods that weren’t delivered in its revenue, contrary to its accounting policy, Asahi said. The company also gave customers incentives to make purchases earlier than they otherwise would to boost revenue numbers, Asahi said.
Independent Liquor had sales of NZ$414 million and Ebitda of about NZ$95 million according to a calculation based on the company’s 2010 accounts filed with New Zealand’s companies’ registry. The company had a comprehensive loss of NZ$95 million that year and NZ$104 million the previous year.
Based on an earnings forecast of NZ$124.6 million to NZ$125 million in the 12 months to Sept. 30, 2011 cited in the statement of claim, Asahi paid about 12.2 times Ebitda for the company, compared to a median of 8.8 times Ebitda in nine alcoholic-drinks takeovers worth more than $1 billion in the previous three years, according to data compiled by Bloomberg.
Independent had Ebitda of NZ$83 million in the year ending September 2011, Asahi said. At that amount of profit, Asahi’s purchase was priced at 18.4 times 2011 earnings.
Several large takeovers in the sector have taken place at higher multiples since then, the data show. Over the past five years, the median deal was at 14.3 times Ebitda, with Diageo Plc.’s bid for United Spirits Ltd. and Heineken NV’s offer for Asia Pacific Breweries Ltd. both at more than 17 times Ebitda.
The case is Asahi Holdings (Australia) Pty v. Pacific Equity Partners Pty. VID87/2013. Federal Court of Australia (Melbourne).
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