Tuatara’s former shareholders in court battle over sale proceeds
The former shareholders of Tuatara Breweries are fighting over close to $1 million from the sale to Japanese drinks Lion.
Malthouse Limited claims Rangatira Investments owes it contingent payments of $920,828.66 as a result of the January takeover by Lion, the Japanese-owned brewer.
Although terms of the sale to Lion have never confirmed, court documents show the price was “in excess of $12 million”.
The price may have been substantially higher, but the $12m figure was used as a benchmark for an “exit event” which would trigger the contingent payment from Rangatira to Malthouse.
READ MORE: Wellington craft brewer Tuatara says its sale to beer giant DB Breweries is no sell-out
Rangatira claims the payment was the subject of a sunset clause, which meant the exit event had to take place at the end of 2015, or it lapsed.
Malthouse applied to the High Court for summary judgement, claiming Rangatira had no arguable defence, but Associate Judge Warwick Smith rejected the claim.
If Malthouse wants to enforce the payment, it will have to go to trial.
Led by property developer and publican Sean Murrie, Tuatara’s former general manager, Malthouse Limited brought in Rangatira as a cornerstone investor in 2013.
Rangatira, a Wellington-based investment fund majority owned by the charitable J R McKenzie Trust, paid $3.1m for a stake of just under 36 per cent.
During the negotiations provision for another payment was added to the terms of the investment. Exactly what would trigger this payment is the subject of the legal battle.
Court documents show that in lengthy negotiations ahead of the 2013 investment, both sides struggled to know what Tuatara was worth.
“Mr Murrie stated that the reason for including the [contingent payment clause]… was that neither Rangatira nor the vendors knew exactly what Tuatara’s potential was,” Associate Judge Smith wrote.
“Rangatira didn’t want to overpay on its investment, and the vendors didn’t want to undersell the business.”
As a result a clause was included in the investment agreement which stipulated if Tuatara’s underlying profits hit a target, the contingent payment clause would be triggered.
Former Rangatira chief executive Ian Frame said in a affidavit that the clause this was to appease Murrie’s concern that the investment fund “might try to take advantage of a quick sale” to avoid the additional payment.
Rangitata had no problem with the clause as it had no intention of making a quick sale, Frame said.
Murrie said in an affidavit in response that he could not recall raising such a concern.
He maintained the contingent payment was designed to ensure that the former owners would be compensated if the Rangatira stake was ever sold for what they believed it was worth.
To Murrie, a complete sell out “was always going to be a potential event somewhere on Tuatara’s horizon, and it was primarily why Rangatira was investing in Tuatara,” Associate Judge Smith wrote.
Associate Judge Smith said he found troubles with Malthouse’s interpretation of the investment agreement, and declined to grant summary judgement.