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Published 15 February 2013 11:02, Updated 20 February 2013 07:31
Asahi has accused PEP and Unitas of 22 breaches of Australian consumer law. Photo: Bloomberg
Stephen Shore and Lucille Keen
Private equity group Pacific Equity Partners is threatening to counter-sue Asahi for damages in New Zealand, after the Japanese brewer launched legal action, claiming it was misled over its $1.2 billion acquisition of Independent Liquor.
PEP claimed Asahi’s action, launched in the Federal Court of Australia on Thursday , was a breach of its sales contract struck in late 2011.
In an aggressive response to allegations that it misled Asahi in the September 2011 sale of New Zealand’s Independent Liquor for $1.2 billion, PEP said the brewer’s claims were “completely untrue and unfounded”.
Asahi claimed PEP and Unitas Capital misrepresented the financial position of Flavoured Beverages Group Holdings, now known as Independent Liquor, by “significantly inflating the EBITDA during the sale process and Asahi’s due diligence”.
It accused PEP and Unitas of 22 breaches of Australian consumer law. The claim refers to an email Independent Beverage’s chief executive at the time, Peter Murphy, sent to PEP directors on July 29, 2011, in which he referred to earnings figures not seen by Asahi, writing Asahi’s first board meeting “should be a fun discussion”.
Asahi alleges Independent Liquor gave its customers incentives to bring forward ordinary sales, a practice known as “channel stuffing”, and failed to account for unpaid marketing expenses.
Asahi believes Independent Liquor’s forecast earnings before interest, tax, depreciation and amortisation for the 12 months to September 30, 2011, should have been $NZ83 million, not the $NZ124.6 million to $NZ125 million the vendors estimated.
It alleges that between June and September 30, 2011, when the asset was sold, PEP and Unitas were aware Independent Liquor would not achieve its forecast earnings. PEP on Thursday said it was “disappointed” with the approach taken by Asahi in relation to the sale of Independent Liquor.
“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,” PEP said in a statement.
Asahi was advised by Nomura and Rothschild. Herbert Smith Freehills was its legal adviser. Independent Liquor chief executive Mr Murphy left the business following the acquisition.
The brewer said the legal action followed in-depth investigations by the Asahi entities, after its post-completion accounting and purchase price allocation work, which led the Asahi entities to suspect they had been provided with false and misleading financial information during the sale process and Asahi’s due diligence.
“It is very disappointing that PEP and Unitas have engaged in this misconduct,” Asahi Australia Holdings managing director, Atsushi Katsuki, said.
“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.”
This story first appeared on The Australian Financial Review.