Inquiry into 2006 sale of Formula One (Delta Topco)
Discussion
This has been brewing for a while now, especially in Germany, but it looks like it has finally taken off
Sky News blog said:
Exclusive: F1 Owners Probe 2006 Takeover Deal, Receive Bid Approaches
Formula One (F1) motor racing faces being thrown into turmoil this evening after the sport’s owners launched a probe into allegedly-corrupt payments relating to its sale five years ago.
I can exclusively reveal that CVC Capital Partners (the private equity firm which owns F1) and the board of Delta Topco (F1’s holding company) have jointly appointed Ernst & Young, the accounting firm, and Freshfields Bruckhaus Deringer, the law firm, to investigate the circumstances surrounding CVC’s takeover of F1 in 2006.
The decision of CVC and Delta’s board to launch a formal probe was prompted by the arrest in January of Gerhard Gribkowsky, a former executive at Bayerische Landesbank (BayernLB), the German bank which was among the shareholders in F1 ahead of its sale to CVC. Gribkowsky, who was chairman of F1’s commercial rights-holder at the time of the sale, was arrested for allegedly receiving the payment of about $50m at the time of the takeover.
The latest developments are likely to send shockwaves through the F1 paddock less than a month before the new season gets underway in Bahrain on March 13.
I’m told that CVC and Delta Topco’s board (which includes the CVC executive Donald Mackenzie, Peter Brabeck-Letmathe, the chairman of Nestle, and Sir Martin Sorrell, chief executive of WPP Group) have instructed E&Y and Freshfields to report back within a matter of weeks.
Among the other Delta board members is Stephen Mullens, a lawyer who serves as a representative of Bambino Holdings, the family trust of Bernie Ecclestone, the F1 supremo.
I can also reveal tonight that Gribkowsky has in recent weeks been removed from the Delta board (pending the outcome of his prosecution), and that Hardy McLain, one of CVC’s co-founders, has been installed on the board in his place.
By coincidence (I’m told), McLain was the CVC partner who oversaw the firm’s previous investment in MotoGP racing (which is now owned by Bridgepoint, another private equity group), although I understand that his status as one of CVC’s most senior executives is the principal reason for his appointment to the Delta board.
There is unsubstantiated speculation that further board changes may take place including the appointment of a new chairman.
Needless to say, I understand that CVC and the board of Delta are taking the probe extremely seriously. The appointments of E&Y and Freshfields are a clear signal that this is the case.
I should point out that the Munich prosecutor's investigation is into Gribkowsky rather than F1 itself or CVC.
CVC’s only public comment about the affair to date has been a statement issued after the Munich state prosecutor’s announcement on January 5 that it was investigating the payment of $50m (or more – the precise number is unclear) to Gribkowsky at the time of F1’s sale to the private equity group:
“CVC notes the press release from the Munich State Prosecutor's office relating to Bayerische Landesbank as reported in the media on 5 January 2011.
CVC can confirm that it has no knowledge of these investigations, nor any circumstances surrounding them, and that we have had no contact with the relevant authorities, nor with Mr Gribkowsky regarding this matter. Furthermore CVC confirms that it has no knowledge of, nor any involvement in, any payment to Mr Gribkowsky or anyone connected with him in relation to CVC’s acquisition of Formula One.”
Since then, CVC has refused to expand on those comments.
Pitpass, an F1 news website, reported at the weekend that Gribkowsky has been in a Munich prison since his arrest last month although I am not clear whether this is still the case.
Since the Munich state prosecutor’s statement in January, the German media has been full of suggestions about the source of the payments to Gribkowsky.
Ecclestone has publicly denied any connection with them, telling one German newspaper last month:
“What the German newspapers speculate or the prosecutor suspects is false. This is absolute nonsense. I did not bribe him. I have nothing to do with these payments to Gribkowsky,” he is reported to have said.
“I would not know why I would have given him money. He was in the negotiations on my side. I did not need to convince him.”
“If the German newspapers write that I had something to do with the payments, which is absolute nonsense, I will take them to court.”
Bambino owned a large stake in the Formula One group of companies (known as SLEC) alongside BayernLB, JP Morgan and Lehman Brothers until CVC’s deal was struck in 2005.
To add to this vast web of intrigue, I am also told that in recent weeks CVC has received a number of approaches about a potential sale of its interests in F1.
Among them, I understand, has been an expression of interest from an Abu Dhabi-based investor, although I am also told that CVC is not pursuing any talks with prospective buyers.
F1 has been a successful investment for the private equity group, but even if it was keen to do so, engaging in a sale of the company with this probe as a backdrop would be untenable.
For the recent history of F1’s ownership, it’s worth revisiting part of the statement made on November 25, 2005, that CVC had reached an agreement to acquire the F1 interests of Bambino and BayernLB. (Note that the holding company created at the time of the takeover has since changed its name a couple of times and is now called Delta Topco.)
“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, Bambino (through a reinvestment), Mr Bernie Ecclestone and the Formula One management team. CVC will have a majority stake in Alpha Prema and a controlling interest in the Formula One Group.
Bernie Ecclestone will remain as Chief Executive of the Formula One Group and Dr Gerhard Gribkowsky (currently Chairman of SLEC Holdings), Donald Mackenzie (CVC) and a Bambino representative will join the Board of Alpha Prema.
CVC is a leading private equity firm in Europe and Asia, and has experience of investing in motorsport and rights management, through its ownership of Dorna, the company that organises and manages the commercial rights of the FIM Road Racing World Championship Grand Prix (MotoGP), which was acquired by CVC in 1998. CVC is also a controlling shareholder of the Automobile Association in the UK.”
Eleven days later, CVC announced that it had also reached agreement to acquire the shares in F1 held by JP Morgan. In March 2006, it received European Commission approval for the takeover and the deal completed days later.
Last month, the Financial Times reported that Gribkowsky faced a major damages claim from BayernLB in relation to the German bank’s takeover of an Austrian rival.
Nobody involved in Delta or the probe into F1’s sale would comment tonight. CVC would only repeat its earlier statement that it had “no knowledge of these investigations [into Gribkowsky], nor any circumstances surrounding them”.
Formula One (F1) motor racing faces being thrown into turmoil this evening after the sport’s owners launched a probe into allegedly-corrupt payments relating to its sale five years ago.
I can exclusively reveal that CVC Capital Partners (the private equity firm which owns F1) and the board of Delta Topco (F1’s holding company) have jointly appointed Ernst & Young, the accounting firm, and Freshfields Bruckhaus Deringer, the law firm, to investigate the circumstances surrounding CVC’s takeover of F1 in 2006.
The decision of CVC and Delta’s board to launch a formal probe was prompted by the arrest in January of Gerhard Gribkowsky, a former executive at Bayerische Landesbank (BayernLB), the German bank which was among the shareholders in F1 ahead of its sale to CVC. Gribkowsky, who was chairman of F1’s commercial rights-holder at the time of the sale, was arrested for allegedly receiving the payment of about $50m at the time of the takeover.
The latest developments are likely to send shockwaves through the F1 paddock less than a month before the new season gets underway in Bahrain on March 13.
I’m told that CVC and Delta Topco’s board (which includes the CVC executive Donald Mackenzie, Peter Brabeck-Letmathe, the chairman of Nestle, and Sir Martin Sorrell, chief executive of WPP Group) have instructed E&Y and Freshfields to report back within a matter of weeks.
Among the other Delta board members is Stephen Mullens, a lawyer who serves as a representative of Bambino Holdings, the family trust of Bernie Ecclestone, the F1 supremo.
I can also reveal tonight that Gribkowsky has in recent weeks been removed from the Delta board (pending the outcome of his prosecution), and that Hardy McLain, one of CVC’s co-founders, has been installed on the board in his place.
By coincidence (I’m told), McLain was the CVC partner who oversaw the firm’s previous investment in MotoGP racing (which is now owned by Bridgepoint, another private equity group), although I understand that his status as one of CVC’s most senior executives is the principal reason for his appointment to the Delta board.
There is unsubstantiated speculation that further board changes may take place including the appointment of a new chairman.
Needless to say, I understand that CVC and the board of Delta are taking the probe extremely seriously. The appointments of E&Y and Freshfields are a clear signal that this is the case.
I should point out that the Munich prosecutor's investigation is into Gribkowsky rather than F1 itself or CVC.
CVC’s only public comment about the affair to date has been a statement issued after the Munich state prosecutor’s announcement on January 5 that it was investigating the payment of $50m (or more – the precise number is unclear) to Gribkowsky at the time of F1’s sale to the private equity group:
“CVC notes the press release from the Munich State Prosecutor's office relating to Bayerische Landesbank as reported in the media on 5 January 2011.
CVC can confirm that it has no knowledge of these investigations, nor any circumstances surrounding them, and that we have had no contact with the relevant authorities, nor with Mr Gribkowsky regarding this matter. Furthermore CVC confirms that it has no knowledge of, nor any involvement in, any payment to Mr Gribkowsky or anyone connected with him in relation to CVC’s acquisition of Formula One.”
Since then, CVC has refused to expand on those comments.
Pitpass, an F1 news website, reported at the weekend that Gribkowsky has been in a Munich prison since his arrest last month although I am not clear whether this is still the case.
Since the Munich state prosecutor’s statement in January, the German media has been full of suggestions about the source of the payments to Gribkowsky.
Ecclestone has publicly denied any connection with them, telling one German newspaper last month:
“What the German newspapers speculate or the prosecutor suspects is false. This is absolute nonsense. I did not bribe him. I have nothing to do with these payments to Gribkowsky,” he is reported to have said.
“I would not know why I would have given him money. He was in the negotiations on my side. I did not need to convince him.”
“If the German newspapers write that I had something to do with the payments, which is absolute nonsense, I will take them to court.”
Bambino owned a large stake in the Formula One group of companies (known as SLEC) alongside BayernLB, JP Morgan and Lehman Brothers until CVC’s deal was struck in 2005.
To add to this vast web of intrigue, I am also told that in recent weeks CVC has received a number of approaches about a potential sale of its interests in F1.
Among them, I understand, has been an expression of interest from an Abu Dhabi-based investor, although I am also told that CVC is not pursuing any talks with prospective buyers.
F1 has been a successful investment for the private equity group, but even if it was keen to do so, engaging in a sale of the company with this probe as a backdrop would be untenable.
For the recent history of F1’s ownership, it’s worth revisiting part of the statement made on November 25, 2005, that CVC had reached an agreement to acquire the F1 interests of Bambino and BayernLB. (Note that the holding company created at the time of the takeover has since changed its name a couple of times and is now called Delta Topco.)
“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, Bambino (through a reinvestment), Mr Bernie Ecclestone and the Formula One management team. CVC will have a majority stake in Alpha Prema and a controlling interest in the Formula One Group.
Bernie Ecclestone will remain as Chief Executive of the Formula One Group and Dr Gerhard Gribkowsky (currently Chairman of SLEC Holdings), Donald Mackenzie (CVC) and a Bambino representative will join the Board of Alpha Prema.
CVC is a leading private equity firm in Europe and Asia, and has experience of investing in motorsport and rights management, through its ownership of Dorna, the company that organises and manages the commercial rights of the FIM Road Racing World Championship Grand Prix (MotoGP), which was acquired by CVC in 1998. CVC is also a controlling shareholder of the Automobile Association in the UK.”
Eleven days later, CVC announced that it had also reached agreement to acquire the shares in F1 held by JP Morgan. In March 2006, it received European Commission approval for the takeover and the deal completed days later.
Last month, the Financial Times reported that Gribkowsky faced a major damages claim from BayernLB in relation to the German bank’s takeover of an Austrian rival.
Nobody involved in Delta or the probe into F1’s sale would comment tonight. CVC would only repeat its earlier statement that it had “no knowledge of these investigations [into Gribkowsky], nor any circumstances surrounding them”.
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