NEW YORK — Hiram Walker Resources Ltd. said Thursday that it has withdrawn from an agreement to sell its liquor business to Allied-Lyons PLC of Britain for about $2 billion.
But a lawyer in New York for Allied-Lyons said that the company had an enforceable contract to buy the business and that it expected the sale to be completed.
Hiram Walker's liquor group makes such products as Canadian Club whisky, Ballantine's Scotch, Courvoisier cognac and Kahlua liqueur.
The withdrawal by Toronto-based Hiram Walker was described in a filing with the Ontario Supreme Court and was not unexpected.
Hiram Walker agreed to the sale in March while it was fighting a takeover bid by Gulf Canada Corp., an energy concern based in Calgary, Alberta. But Gulf Canada later succeeded in buying 69% of Hiram Walker's stock and is now trying to keep the liquor group.
The filing was part of new legal proceedings that Gulf Canada and Hiram Walker said earlier this week that they planned to launch to block the Allied-Lyons agreement. The court rejected an earlier challenge to the sale made by Gulf Canada and its parent, Olympia & York Developments.
Olympia & York, controlled by the Reichmann family of Toronto, owns an additional 10% of Hiram Walker.
The latest Hiram Walker-Gulf Canada filing says Hiram Walker was exercising its right to back out of the agreement.
But Gerald Kerner, a lawyer for Willkie, Farr & Gallagher, Allied-Lyons' outside counsel in New York, said that "there is no provision for them to back out of the agreement at this stage."
He said Allied-Lyons would seek to ensure that the agreement is enforced "and, if appropriate, to obtain monetary damages for breach of the agreement if it is not complied with."
The liquor group's sale to Allied-Lyons was one of Hiram Walker's two defenses against Gulf Canada's takeover offer.
The other was the formation of a company called Fingas Investment Corp., owned in part by Hiram Walker and Allied-Lyons, that was to make a rival tender offer for Hiram Walker's stock using the proceeds from the liquor group's sale.
The Fingas offer never took place, however, and in late April Hiram Walker's board endorsed an offer from Gulf Canada, which then acquired control of Hiram Walker, which also has interests in oil and natural gas.
In its legal filing, Hiram Walker asserted that it and Allied-Lyons "intended and agreed" that the liquor group would be sold only to finance the Fingas offer and that if the Fingas offer did not proceed "neither should the sale of the (liquor division's) shares."
Hiram Walker further said it was free to withdraw from the sale until Allied-Lyons' stockholders voted on the transaction. That vote is scheduled for Tuesday.
Kerner, however, said there was "no provision in the agreement that justifies that position on their part." He said it was "simply not the fact that the (liquor) share-purchase agreement is in any manner, shape or form contingent on the Fingas transaction."