Beer wars: Beverage giant Asahi at war with local private equity over New Zealand liquor purchase
Japanese beer brewing company Asahi is taking legal action against private equity investors Pacific Equity Partners and Unitas Capital, accusing both of providing potentially misleading financial information about a deal with Independent Liquor New Zealand.
The legal action follows extensive investigations by Asahi into the post-deal accounting and purchase price of ILNZ – the company purchased ILNZ in 2011 for $NZ1.5 billion from PEP and Unitas.
ILNZ owns both the popular brands "Woodstock Bourbon" and "Vodka Cruiser", the latter subjecting the company to the government's "alcopop" tax on ready-to-drink, spirit-based beverages.
But it alleges PEP and Unitas Capital provided it with "false and misleading" information during the sale process regarding the financial position of ILNZ (formerly known as Flavoured Beverages Group Holdings).
Asahi confirmed this morning it has begun court proceedings with the Federal Court in Melbourne against the private equiteers.
Managing director of Asahi Holdings Australia, Atsushi Katsuki, said in a statement the company conducted "due diligence" and want to recover the company's loses.
"It is very disappointing that PEP and Unitas have engaged in this misconduct.
"We conducted due diligence thoroughly and in good faith and relied on the figures provided to us. We are seeking maximum recovery of our loss and we have commenced legal proceedings for this purpose," Katsuki said.
An Asahi spokesperson told SmartCompany the company had thought the price was reasonable based on what they were told.
"The purchase price we paid upon completion was fair and appropriate based on the financial information provided. However, we now know that the information we were given was false and misleading.
"We are seeking damages for the difference between the purchase price and the real value of the Independent Liquor business at completion. These damages will be determined by the court, based on expert evidence. Accordingly it is not appropriate for us to comment further. What we can say is that we will pursue all avenues available to us to achieve maximum recovery," the spokesperson said.
SmartCompany contacted PEP but no one was available to comment prior to publication.
When the deal was made in August 2011, Asahi was in the process of expanding its operations outside of Japan and had been focusing on other Asia and Oceanic markets.
The purchase of ILNZ was designed to boost revenue as Asahi was struggling with the beer market in Japan, which has shrank more than 15% in shipment volumes in the last decade. The government's alcopop tax caused a 27% reduction in the sale of mixed and ready-to-drink beverages.
However, IBISWorld analyst Andy Brennan told SmartCompany the alcopop tax didn't have a huge impact on the industry as a whole because pre-mixed drinks only account for a small portion of the industry.
"Ready to drink, pre-mixed cans make up around 15% of the industry and this figure has been quite steady for some time. Because it's a relatively small area of the market, the tax hasn't had too much of an impact on the overall market.
"However, the alcopop tax was really well publicised and I think its influence tends to be over-inflated by the media," he says.
Brennan says in general the alcoholic beverages industry continues to grow and consumers are favouring craft beers and quality wines.
"The annual growth rate for the liquor retailers is expected to be around 3% and by 2017 it will be valued around $19.9 billion," he says.
The overriding trend for the industry is Australians are drinking less but spending more, particularly on premium products.
"People are drinking less beer and more wine and a little bit more spirits. Craft beers and ciders and better quality wines still make up a small proportion of the overall market (3-4% each) but both drinks are growing rapidly with some growth rates are as high as 200%," Brennan says.