10/02/2011
NEWS STORY
 |
Surprise surprise, there is yet another report in the German media about Gerhard Gribkowsky, the former chairman of SLEC, F1's rights-holding company, who is currently in prison in Munich under suspicion of receiving a bribe for undervaluing the shares in the business when it was sold. Surprise surprise, the report links the bribe to F1's boss Bernie Ecclestone and, surprise surprise, the report is complete and utter nonsense.
To recap, when Gribkowsky was SLEC's chairman he represented German bank BayernLB which owned a 46.6% stake in the company. Two other banks, JP Morgan and Lehman Brothers, owned around 14.2% each with the remaining 25% in the hands of Bambino Holdings, the investment vehicle of the Ecclestone family trust.
On 25 November 2005 Bayern agreed to sell its shares in SLEC to F1's current majority owner, the private equity firm CVC, and, according to Barbara Stockinger, spokeswoman for the prosecutors, the shares "had been sold without being properly evaluated." Stockinger added that "the suspect in turn received $50m in payments disguised via two consultancy agreements."
The theory is that Gribkowsky deliberately undervalued the shares and received $50m for doing so. Receiving a bribe is just as illegal as giving one yet, despite this, no one has been arrested for paying the money. It is now one month and four days since Gribkowsky was arrested so the fact that the payer of the alleged bribe has not yet been arrested causes Pitpass' business editor Chris Sylt to smell a rat when it comes to the theory above. But that's not all.
The latest reports in the German media speculate that CVC paid $837m for Bayern's share but Bayern actually only got $770m as $40m was received by Ecclestone with $27m going to Bambino. This theory is utterly laughable.
It has been over five years since CVC agreed to buy Bayern's SLEC shares so there is no doubt that if the bank had not been paid the amount that it expected to receive it would have filed a lawsuit for breach of contract against CVC. This has not happened and in the UK there is a six year time-frame for suing for breach of contract so Bayern is running out of time if it ever wanted to take action for this.
In short, there is absolutely no evidence that Bayern was not paid the amount it expected to receive from CVC. Indeed, the bank has admitted that it gained from the sale as it reported a valuation yield of €328m in its 2006 results and stated that the F1 shares "decisively contributed to the positive result." Presumably, if Bayern hadn't been paid the amount it expected to receive from CVC it would have stated this in the results along with the fact that the bank was taking legal action to recover the missing funds.
This means that CVC paid Bayern the amount that the bank expected to receive. Accordingly it is simply impossible that CVC paid $837m for Bayern's share but only $770m went to the bank. This debunks yet another spurious theory which attempts to link Ecclestone to paying a bribe for undervaluing the shares. Uninformed sceptics could foolishly claim that Sylt is biased since he is one of the only journalists worldwide who regularly meets Ecclestone for lunch. However, not only would this accusation be utterly false, it would be a refusal to accept that which is directly in front of one's nose. If you think about it hard enough there really isn't even any need for evidence to debunk the theory above, it is common sense.
Think about it. Gribkowsky has been arrested for allegedly taking a bribe to undervalue the shares in SLEC. Clearly, if (and it is a big if) this was true then the bribe would obviously have been paid by whoever benefited from the shares being undervalued. It doesn't take a genius to work out that the buyer is the party who would benefit from the shares being undervalued and this completely rules out Ecclestone. We should state that CVC has denied paying a bribe - not surprising really given that, as Pitpass previously reported, the shares were in fact not undervalued. Unfortunately, authors on a very brave F1 website (which will remain anonymous to save it embarrassment) don't seem to understand this common sense. It is a dangerous game to play.
One reckless writer on the website says: "we know BE has unspecified interest (supposedly10%) in the CVC fund IV that controls 100% of FOM because CVC tells us so." Now that is news to Pitpass. Not only has CVC never made any statement suggesting that Ecclestone has any kind of interest in the fund which controls F1, but the identity of its investors is a secret safe in Luxembourg so there is an incredibly slim likelihood that the writer has managed to break through this firewall. Nevertheless, it hasn't stopped the website from publishing the claim and what a claim it is.
Under UK law the onus is on the source to prove that its facts are true if it were to be legally challenged. Accordingly, the website would have to prove that Ecclestone does indeed own a stake in the CVC fund which controls F1. If it can't do this then it is left with a false claim which links Ecclestone to the buyer of the shares. It doesn't stop there.
Another uninformed writer on the website writes that "Bernie was effectively a shareholder in the buyer." Really? Let's consider the facts. On 25 November 2005 the following press release was issued: "CVC Capital Partners, Bayerische Landesbank and Bambino Holdings are pleased to announce that a new company, Alpha Prema has reached agreement to acquire Bayerische Landesbank's and the S. Ecclestone trust's ("Bambino") interests in Formula One Group...The shareholders of Alpha Prema will be CVC Capital Partners ("CVC"), Bambino (through a reinvestment), Mr Bernie Ecclestone and the Formula One management team."
We need to note the very careful wording of this press release - it states who the shareholders of Alpha Prema will be but not who they are at the time the acquisition was agreed. Clearly, if Ecclestone was indeed a shareholder in Alpha Prema when it agreed to acquire the shares from Bayern then it could be legitimate to say that he "was effectively a shareholder in the buyer," and it would also mean that he could have benefited from the shares being undervalued. However, this is not the case.
Anyone who knows anything about how private equity deals are structured will understand that they involve companies being bought with a mixture of debt and money from a fund. At a later stage management may take shares in the business and this is precisely what happened with F1. As the press release above shows, Alpha Prema agreed to acquire Bayern's shares on 25 November 2005 and the company was incorporated on 4 November 2005. Its incorporation documents show that its owner was Jersey-based company Alpha Topco. The annual return for Alpha Topco, dated 1 January 2006, shows that the company was owned by CVC. Ecclestone's name is nowhere to be seen.
Accordingly it is false to say that "Bernie was effectively a shareholder in the buyer" and so the website is left with another false claim which links Ecclestone to the buyer of the shares.
But we don't even need to have access to company documents to show that Ecclestone was not in fact a buyer of Bayern's shares. On the most basic of levels, Ecclestone was F1's chief executive so if he had been one of the buyers the deal would have been at least in part a management buyout but this was never mentioned. Indeed, the press release says it all as the deal was announced by "CVC Capital Partners, Bayerische Landesbank and Bambino Holdings." Why were those three named? Because, in that order, they were the buyer and the two sellers. Pretty obvious really. Unfortunately that hasn't stopped more false claims.
The previously mentioned writer goes on to say that it is "incorrect" that "the deal had no direct connection involving Bernie/CVC/FOM" because "Bernie personally received shares in the parent of the acquiring entity as part of the deal; the Ecclestone family trust (Bambino) sold its shares in SLEC as part of the deal; the Ecclestone family trust (Bambino) received shares in the parent of the acquiring entity as part of the deal."
Whilst this demonstrates that both Bambino and CVC were involved with the deal (just as the F1 press release stated) it does not prove that Ecclestone was one of the buyers. So clearly, it is indeed correct to say that the deal had no direct connection involving Ecclestone, unless of course the writer believes that Ecclestone and Bambino are one and the same. Another writer on the website certainly thinks this but it is far from the truth.
"It's been reported that CVC having paid $1232m for Speed Investment's 75% of SLEC and another $478m to Eccleston's for his 25% share," states the writer. A quick look at the F1 press release shows that Bambino is described as the "S. Ecclestone trust". There is good reason for this and that is because at the time the trust's beneficiaries were Ecclestone's wife Slavica and their two children. Some of the trust's most valuable assets (its shares in SLEC) were transferred to it by Ecclestone and he has confirmed that he has no ownership interest of any kind in Bambino. Indeed, back in 2004, Bambino's lawyer stressed the importance for Mr Ecclestone and Bambino Trust of the "separateness" between them "for various reasons". So it is extremely foolhardy indeed for any website, unless it has very good evidence, to link Ecclestone to Bambino.
Whilst we don't expect other websites to employ a business expert to analyse the material they publish, as we do here at Pitpass, they should be careful letting writers loose with comments, such as those linking Ecclestone to Bambino, in case they could attract his attention and that of his lawyers. No doubt the speculation will continue but take our word for it: the shares weren't undervalued and Ecclestone didn't bribe Gribkowsky to undervalue them.