Private equity firms pay $220m in Asahi case settlement

Japanese brewer Asahi and its New Zealand operation, Independent Liquor, have confirmed a settlement over their court action against the previous owners.

In the deal, announced today, Asahi will be paid $220 million in compensation, believed to be the biggest commercial payout in a law suit in New Zealand or Australia.

Settlement was foreshadowed late in October when a judge in the Australian Federal Court postponed proceedings in the $500 million case against private equity firms Pacific Equity Partners (PEP) and Unitas Capital.

Asahi first launched its action in February 2013, claiming Independent Liquor’s earnings were overstated in the $1.5 billion acquisition deal in 2011.

Settlement has also ended side proceedings brought by Asahi against insurers in May 2014.

Asahi says in a statement, “we expect to record extraordinary income during this fiscal year.”

It adds: “On the other hand, we will not make any changes to the forecast announced on 6 August 2014 at this time, as we intend to consider and implement reduction/reassessment of our assets through implementing asset streamlining measures that we set out in our ‘Midterm Plan 2015’ ahead of schedule and revisiting the future plans mainly of our overseas subsidiaries, while securing achievement of each business plan.”

At issue in the case were forecasts that Asahi claims led it to believe the ebitda (earnings before interest, tax and amortisation)  of the business would be $125 million for the year to September 2011 and that earnings were on an increasing trend.

Asahi’s statement of claim said the forecast for September 2011 should have been $NZ83 million. Based on the difference in earnings estimates from both parties, Asahi was effectively claiming $522 million in damages, and alleged the sellers breached either the Australian Consumer Law or the Corporations Act.

Independent Liquor is the fourth largest liquor player in the Australian and New Zealand markets after SAB Miller/Treasury Wine Estates, Kirin-owned Lion and Heineken, which owns DB Breweries.

Asahi also owns soft drink and juice company Charlie’s Group in New Zealand (now The Better Drinks Company) and Schweppes and P&N in Australia.