Bluewaters claims 650 million dollars from CVC and Ecclestone

Once again, the sale of Formula 1 by BayernLB to CVC in 2005 is the subject of a legal complaint. Indeed, the investment fund Bluewaters believes it made the highest offer for the shares held by the German bank, especially since it stated in its written offer that it would pay 10% more than any other candidate for this acquisition.

To understand this imbroglio, one must go back to 2001 when the German media mogul Leo Kirch acquired 75% of the firm Speed Investments, which controlled F1 and its affiliates. In order to gather the necessary funds for such a transaction, he placed these shares as collateral with the three lending banks, Lehman Brothers, J.P. Morgan, and BayernLB, which were brought together for the occasion within the Bank Group consortium.

When the Leo Kirch group went bankrupt in 2002, Bank Group found itself in possession of these 75%, alongside Bernie Ecclestone’s family fund, Bambino. However, Bernie Ecclestone was and wished to remain the director of F1, the work of his life. This led the banking consortium to be in the unlikely situation of holding the majority of F1’s shares but not being able to exercise operational control. The battle then moved to the legal field, culminating in a victory granted in December 2004 by the courts to Bank Group.

It was at this moment that the two American banks of Bank Group, Lehman Brothers and J.P. Morgan, approached Bluewaters for a sale of the shares held by Bank Group in Speed Investments. This was followed by long months of negotiations. A first step was taken on April 13, 2005, when Bluewaters submitted a letter of offer to purchase the entire 46.65% stake held by BayernLB in F1. Eight days later, BayernLB responded in writing with a number of requirements to complete this transaction.

On June 29, 2005, Bluewaters sent a new letter to BayernLB responding to the German bank’s requirements. To demonstrate the seriousness of its approach, it attached a copy of the financing agreements contracted with the private equity funds Apollo and King Street, each of which contributed 500 million dollars to the operation.

But it was on October 4, 2005, that John Gregg, the CEO of Bluewaters, sent an email to Gerhard Gribkowsky stating that his fund was making a one billion dollar offer to acquire the 75% held by the three banks. To ensure the deal wasn’t snatched by a competitor, he even asserted that he was willing to pay 10% more than any other prospective buyer. However, without a response from Gerhard Gribkowsky, he reiterated his offer on November 15, 2005.

It was a lost cause since the German bank and CVC issued a joint press release on November 25, 2005, announcing that the investment fund was buying BayernLB’s shares for $831 million. On December 2, 2005, it was J.P. Morgan’s turn to accept an offer from CVC for the sum of $210 million. Lehman Brothers followed suit two weeks later, resulting in a check of $209.25 million issued by CVC. In total, CVC paid $1.25 billion to acquire the 75% of F1 owned by the Bank Group, which is 25% more than what Bluewaters offered, while Bluewaters claims in its complaint that Gehrard Gribkowsky acted against his company’s interests since he accepted a lower offer than the one it proposed.

Bernie Ecclestone is also named in this complaint because he admitted during Gerhard Gribkowsky’s trial that he paid $44 million to the BayernLB executive, officially to prevent him from making false statements to the British tax authorities that could have cost Bernie Ecclestone billions of dollars. Bluewaters claims in its complaint that Bernie Ecclestone viewed Apollo’s involvement in the takeover operation unfavorably due to its reputation for deeply intervening in the management of the companies it acquires. This is why he allegedly preferred CVC to become his new majority shareholder. Bluewaters offers as evidence that the payment of $44 million was made to GG Consulting on November 25, 2005, exactly on the day of the public announcement of the takeover by CVC.

Bluewaters believes it has been wronged by the actions of various parties, especially in light of the two one-billion-dollar dividends paid out to CVC in 2007 and 2012, and the prospect of a public listing valuing F1 at ten billion dollars, following the sale of 21% of F1 for 1.6 billion dollars and another 5.5% for an additional 500 million dollars. Bluewaters estimates its lost earnings at at least 650 million dollars, a sum it hopes to recover in New York courts.

Nevertheless, there is a strong likelihood that the legal battle will last many months, or even years, given the scope of the financial stakes.

With the participation of www.Racingbusiness.fr