Japanese strategic buyer sues PEP and Unitas

Japan's Asahi Breweries is alleging it overpaid for Independent Liquor, which it bought from the private equity duo in 2011 for NZ$1.53bn.

Tokyo-based Asahi Breweries has launched legal action in Australia against Pacific Equity Partners and Unitas Capital, alleging that it overpaid when it acquired Independent Liquor from the firms in 2011 for NZ$1.53 (€960 million; $1.3 billion).

Asahi alleged the two private equity firms “engaged in misleading and deceptive conduct by making false representations as to the financial position of Flavoured Beverages Group, now known as Independent Liquor, in particular by significantly inflating the EBITDA, or earning before interest, taxes, depreciation and amortization, during the sale process and Asahi's due diligence”, according to media reports.

PEP and Unitas issued a joint statement saying they were “disappointed with the approach taken by Asahi”.

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

The joint statement also claimed Asahi’s approach was in breach of contract and the private equity firms “intend instituting legal proceedings and seeking damages in the New Zealand Courts”.

In 2006, PEP and Unitas acquired respective 43.9 percent stakes in Independent Liquor, a New Zealand company whose products include Martineau brandy, Haagen beer and Sanctuary wines, for NZ$1.2 billion, Private Equity International reported earlier.

In August 2011, Asahi bought the company after winning a bidding process that included competition from Japan’s Suntory Group and China’s Bright Food Group.

A source close to the matter said the Australian market for beverage companies collapsed three months after Asahi bought Independent Liquor, also hitting competitors such as Fosters. In addition, he believes Asahi is trying to integrate several other Australian acquisitions that haven’t been performing as well as expected, which also puts the Independent Liquor acquisition under pressure.