Despite a UK judge ruling otherwise, and despite masses of evidence to the contrary from the seller, German prosecutors still believe that Formula One was undervalued when it was bought by the private equity firm CVC for £1.2bn ($2bn) in 2006. The claim is made in the indictment against F1's boss Bernie Ecclestone according to an article in the Sunday Express by Christian Sylt.
It is one of the claims at the heart of Ecclestone's bribery trial, which is currently under way in Munich, and the alleged undervaluation is supported by testimony from John Gregg, the former chief financial officer of British telecoms firm NTL.
Ecclestone and his Bambino family trust have been accused of paying a £26m ($44m) bribe to Gerhard Gribkowsky, the former chief risk officer of German bank BayernLB which owned a 47.2% stake in F1. Prosecutors believe that Gribkowsky was bribed to steer the sale of the stake to CVC as it had agreed to retain Ecclestone as F1's boss.
Ecclestone denies paying a bribe and says that Gribkowsky threatened to make unfounded allegations about his tax affairs if the £26m was not paid.
Close inspection of the indictment reveals that the accountancy firm Deloitte carried out a valuation of F1 in April 2011 and forecast three scenarios. It states that the most likely were two and three and therefore "the enterprise value very probably comes out at between £1.3bn ($2,209m) and £1.6bn ($2,736m) respectively, with the value of the BayernLB stake from at least £612.4m ($1,030m) to £758.7m ($1,276m). This strongly suggests that an undervalued sale took place."
CVC paid £457m ($772m) for BayernLB's stake. However, the indictment states that in 2012 Gribkowsky told prosecutors that he thought the bank should have got "a higher potential net product of approximately £208.1m ($350m)" which reflects Deloitte's findings.
The indictment adds that because Gribkowsky had an incentive to favour CVC he put through the sale "without support and without obtaining or checking alternative offers and without the involvement of the [BayernLB] staff team."
One such offer came from the investment firm Bluewaters which was founded by Gregg. He has been involved with several European cable companies including NTL where he helped to set up the pioneering internet service Virgin.Net with Sir Richard Branson. Gregg claims that Bluewaters offered 10% more than any other bidder for F1 but was rejected by Gribkowsky because he had been bribed to sell to CVC.
The indictment states that "the witness Gregg explained that Bluewaters calculated the enterprise value of Formula 1 at between £1.5bn ($2.5bn) and £2.1bn ($3.5bn)." However, it adds that no record has been found of Bluewaters' offer to pay a 10% premium.
The German prosecutors aren't the only ones who failed to find Bluewaters' offer document. The investment firm sued Ecclestone in New York's Supreme Court but its case was thrown out earlier this year as the judge ruled that it was the wrong place for it to be heard and that the key document had not been disclosed.
Two other hurdles stand in the way of the claim that F1 was undervalued. Last year Ecclestone was sued in London by German media rights firm Constantin Medien which claimed to have lost out as a result of the alleged bribe. Constantin had an agreement entitling it to 10% of the proceeds if BayernLB's F1 stake sold for more than £654m ($1.1bn). As BayernLB was paid less than this Constantin did not share in the proceeds. Like the German prosecutors, it claimed that the stake was undervalued as higher bidders would have come forward if the sale to CVC had not been engineered.
The judge, Mr Justice Newey, ruled that Ecclestone paid Gribkowsky so he would agree to sell to CVC but this did not undervalue the stake as BayernLB "would have accepted CVC's offer even if the agreement had not been made."