February 14, 2013 10:14 am

Asahi seeks damages over NZ deal

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A liquor shop owner stocks cans of Asahi Super Dry beer in Kawasaki, Japan©Bloomberg

Asahi is suing two buyout firms for allegedly misleading it about the earnings of Independent Liquor, the New Zealand based drinks company the Japanese brewer bought from them in 2011 for NZ$1.5bn (US$1.3bn).

In an unusual move for a Japanese company, Asahi is seeking unspecified damages for “making false representations as to the financial position” of Independent Liquor, the brewer said in a statement.

“We are seeking maximum recovery of our loss,” said Atsushi Katsuki, managing director of Asahi’s Australian unit.

Asahi claims that Pacific Equity Partners, Australia’s largest buyout firm, and Unitas “significantly” inflated the earnings before interest, tax, depreciation and amortisation of Independent Liquor during the sale process and Asahi’s due diligence.

After completing the acquisition, Asahi conducted in-depth investigations, which led it to suspect that PEP and Unitas had provided the Japanese group with “false and misleading information during the sale process and Asahi’s due diligence,” it said.

The brewer had signalled its concerns about the price it had paid for Independent Liquor last May, when it said it “felt there was a gap between the price that we paid and the actual value of the company,” according to an Asahi representative.

“Generally, Japanese companies have a long history of paying rich prices,” Toby Williams, analyst at Macquarie, said.

PEP and Unitas said Asahi had breached the terms of the sale contract by filing a lawsuit and they were considering legal proceedings to seek damages in the New Zealand courts.

“The allegations foreshadowed by Asahi are completely untrue and unfounded,” they said in a joint statement. “Asahi and its team of expert advisers were given full access to information and management during a three-month due diligence process.”

Asahi acquired Independent Liquor in an effort to reduce its dependence on the shrinking Japanese beer market and raise its overseas sales ratio from about 6 per cent to about 30 per cent in the medium term.

To that end, Asahi went on a buying spree in 2011, acquiring the mineral water and fruit juice business of P&N in Australia, Charlie’s, the New Zealand fruit juice company, Independent Liquor and Permanis, the Malaysian beverages group.

Independent Liquor is the largest of five overseas acquisitions Asahi has made in the Asia and Oceania regions and was priced at a relatively high 12 times earnings before interest, tax, depreciation and amortisation.

Asahi has already sold off Haitai Beverages in Korea, in which it started investing in 2000 and gained 41 per cent in 2004.

Asahi is aiming to increase the operating profit margin of its overseas businesses to 9 per cent by 2015, from just 4 per cent last year, when the overseas businesses provided Y158bn in revenues and Y7bn in operating profits.

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