Starbev GP Ltd v Interbrew Central European Holdings BV
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair |
| Judgment Date | 29 April 2014 |
| Neutral Citation | [2014] EWHC 1311 (Comm) |
| Docket Number | Case No: 2012 folio 1398 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 29 April 2014 |
[2014] EWHC 1311 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Blair
Case No: 2012 folio 1398
Lord Grabiner QC, Simon Colton, Nehali Shah (instructed by Allen & Overy LLP) for the Claimant
Ali Malek QC and Richard Brent (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the Defendant
Hearing dates: Tuesday 25 February to Thursday 27 February, Monday 3 March to Thursday 6 March and Tuesday 11 March
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This case arises out of a dispute between the seller and buyer of a business as to what, if any, further payments are due to the seller pursuant to the element of deferred consideration agreed between them. The seller, Interbrew Central European Holdings BV ("ICEH"), is a Dutch subsidiary of the global brewer, Anheuser Busch InBev NV/SA ("ABI"), which is a Belgian company listed in Brussels and on the New York Stock Exchange. ICEH is the defendant in these proceedings.
The buyer is part of a structure created for the transaction by private equity investment funds advised and managed by CVC Capital Partners ("CVC"), a private equity firm. The structure includes the claimant, Starbev LP ("Starbev"), a limited partnership registered in Jersey, which in these proceedings is acting through its general partner, Starbev GP, a limited company incorporated in Jersey. The limited partners include funds managed by CVC. The entity that was the buyer under the sale and purchase agreement was Starbev Sàrl, a Luxembourg company, which is indirectly owned by another Luxembourg company, Starbev Holdings Sàrl ("Caspian"), which in turn is owned by the claimant.
In substance, the dispute is between ABI and CVC. Where it is necessary to distinguish between particular entities, I refer to the entity concerned. Otherwise, in reading this judgment it may be helpful to keep in mind that on the claimant buyers' side are the CVC Funds and their Starbev vehicles. On the defendant sellers' side are ABI and its subsidiary ICEH which held the business (reference to ABI and ICEH is usually interchangeable).
The business which was the subject of the transaction consisted of ICEH's brewing business in Central and Eastern Europe. The deal was completed in 2009, and included an element of deferred consideration to which the seller was entitled under a "Contingent Value Right" on the on-sale of the business by CVC. An on-sale happened in 2012 when the business was sold by Starbev to the American brewer, Molson Coors. Starbev and ICEH are in dispute as to the amount due in respect of the deferred consideration, and each seeks declarations from the court in support of its respective interpretation of the contractual documentation.
Though the issues arising are primarily issues of construction, both sides gave factual evidence in the form of documentary evidence and witness evidence in three main respects; first, as to the factual matrix, second as to Starbev's estoppel argument, and third as to whether the transaction by which Starbev sold the business on was structured with the purpose of reducing payments due to ICEH thereby engaging certain "anti-avoidance" provisions in the Contingent Value Right.
The witnesses at trial were all witnesses of fact. The four witnesses called by Starbev were as follows. Mr Tom Meredith is employed by CVC Partners Ltd, and he was a member of the CVC team working on the deal. Mr Istvan Szoke is a partner and head of the Central Eastern Europe business for CVC Partners Ltd, and he headed the deal team at CVC. The other two witnesses were not involved in the deal making, but in the administrative and investment approval functions. Mr Carl Hansen is the Senior Managing Director of CVC Capital Partners Jersey Ltd and is a director of Starbev GP. Mr Fred Watt is a Managing Partner and Chief Operating Officer of CVC Partners Group.
The four witnesses called by ICEH were as follows. Mr Pedro Earp is now employed by ABI as Vice-President, Marketing, Latin America. At the time of the deal with CVC he was Vice President for M&A. Mr Rafael Goncalves is ABI's Global Vice-President of Budgeting and Business Planning. At the time, he led the ABI team on the CVC deal reporting to Mr Earp. Mr Robert Golden is Vice-President, M&A of ABI, and took over from Mr Earp in late 2009. Mr Nicholas Caton is presently Director, Asia-Pacific Corporate Strategy, of ABI, but worked in M&A at the time of the on-sale of the business by CVC in 2012.
Certain criticisms were made of the witnesses by the parties, particularly by Starbev of ICEH's witnesses. But so far as such criticism is put in general terms, I do not accept it, and in my view, each witness on both sides gave their evidence in a professional manner. However, whilst I have accepted much of their evidence, in certain respects, and for reasons set out below, I have not accepted all of it. So far as necessary, any other comments about the witnesses are set out in the course of this judgment.
There are two further points to note here. First, both sides complained of the absence of witnesses. ABI had its own small M&A function, consisting of two or three people. Between January 2011 and January 2012, one of them was a Mr David West, who did not give evidence. Whilst I accept that his evidence may have added something as regards the estoppel case, he was not with the M&A function either at the time of the 2009 deal with CVC or the 2012 on-sale to Molson Coors. I draw no adverse inference from the failure to call him. There is in my view no basis for Starbev's criticism of the fact that the signatory of the statement of truth in ICEH's original defence was not called (this point was made by Starbev in connection with ICEH's pleading as to what ABI was able to determine from various documents, which having regard to the evidence I do not think is significant).
Judging by certain emails he sent, I agree with ICEH that a more significant omission is that Starbev did not call Mr Przemek Obloj, who was involved for CVC reporting to Mr Szoke in both the 2009 deal with ICEH and the 2012 on-sale. On the whole, however, I think that this is more a matter of comment as to why the witness was not called rather than the drawing of an adverse inference on issues of fact (c.f. Prest v Prest [2013] 2 AC 415, at 492F, Lord Sumption). Similar considerations apply to Mr Alex Fotakidis who was involved for CVC in the 2009 deal at a more senior level (he seems to have been involved in some capacity in the 2012 deal also), though I was told that he was not a key member of the deal team.
The second point is that both Mr Meredith and Mr Szoke accepted in cross-examination that they have a financial stake in the outcome of the litigation, because it may affect their share (whatever that might be) of the 20% performance fee charged by the fund. I agree with ICEH that this fact should have been disclosed in their witness statements and consider this to be a regrettable omission. But I do not think that in itself it has much impact on the appraisal of their evidence. As Starbev says, in private equity deals the deal team is likely to have a stake in the financial outcome, so to that extent, it was not unanticipated.
The background to the deal
The facts as I find them are as follows. ABI came into existence as the result of the merger of various substantial brewery businesses globally. The details do not matter for present purposes, but broadly in 2004 there was a merger between Brazilian and European businesses to form InBev, followed in November 2008 by a merger with the American company, Anheuser-Busch. This substantial deal, which closed in the middle of the financial crisis, was financed largely with debt. I was told by Mr Golden that in 2009 a top priority for the company was raising cash to pay down the debt. That gave rise to an extensive disposals programme under which ABI sold assets for over US$7bn in 2009.
In early 2009, CVC began to investigate the possibility of the CVC Funds acquiring ABI's central and eastern European brewing businesses. The day-to-day head of the CVC deal team was Mr Szoke. Another member of the team was Mr Meredith. The early stages of the project involved them putting together teams of external advisers (including corporate finance, legal, accounting and industry specialists), starting due diligence, and beginning to engage with ABI.
Mr Earp led for ABI, and Mr Goncalves worked with him. Having heard the evidence, I consider that the CVC team was the more focused in its approach. Once they had decided on a deal, they were in my view completely single-minded in getting it done. ABI's team, on the other hand, had other disposals proceeding at the same time, and they seem to have placed more reliance on their investment bankers for advice. Notwithstanding, both sides were professionals, and knew what they were about. In terms of external advisers, ABI's advisers were similar in makeup to those of CVC.
On 27 July 2009, CVC submitted a non-binding offer to ABI for the business, which was rejected. On 7 August 2009, CVC submitted a further offer totalling approximately €1.545bn, which was about US$2.220bn at current exchange rates. However, this fell short of ABI's target valuation of US$2.400bn. It is not in dispute that the gap between the parties was about US$200m.
By now, the only potential buyer was CVC, and, as Mr Goncalves put it, the central and eastern European M&A market was poor in 2009 because of...
To continue reading
Request your trial
-
ABN Amro Bank N.v v. Royal & Sun Alliance Insurance Plc
...of the other” (see also [81] of Mann J's judgment). 82 Secondly, in Starbev GP Limited v. Interbrew Central European Holding BV [2014] EWHC 1311 (Comm) (“ Starbev”), Blair J recorded at [127] the common ground there that silence could only amount to acquiescence where there was a duty to s......
-
The Cultural Foundation (doing business as American School of Dubai) v Beazley Furlonge Ltd (as managing agent for Syndicate AFB 2623/623 at Lloyd's)
...252. Sir Christopher continued: “74 Blair J considered this line of authority in Starbev GP Ltd v Interbrew Central European Holdings BV [2014] EWHC 1311. In essence he held that a duty to speak, failure to fulfil which would give rise to estoppel by acquiescence, may arise on the particula......
-
Ted Baker Plc and Another v AXA Insurance UK Plc and Others
...1334, Kier Construction Ltd v Royal Insurance (UK) Ltd, 30 Con LR 45, Drake Insurance v Provident [2004] QB 601, Starbev GP Ltd v Interbrew Central European Holdings BV [2014] EWHC 1311 (Comm) and ING Bank NV v Ros Roca [2011] EWCA Civ 353. I confess that it was not always easy to understa......
-
Ted Baker Plc and Another v Axa Insurance UK Plc and Others
...a difference between it and Ros Roca on the calculation of its fee. 74 Blair J considered this line of authority in Starbev GP Ltd v Interbrew Central European Holdings BV [2014] EWHC 1311. In essence he held that a duty to speak, failure to fulfil which would give rise to estoppel by acqui......
-
Global Arbitration Review - The Guide to M&A Arbitration: United Kingdom
...to enter into a contract, they may give rise to 8 See for example: Starbev GP Limited v. Interbrew Central European Holdings BV [2014] EWHC 1311 (Comm); Sha v. Rutherford [2014] EWCA Civ 1186; Heritage Oil and Gas Ltd & Anor v. Tullow Uganda Ltd [2014] EWCA Civ 1048; Ageas (UK) Limited v. ......
-
Beyond the Real and the Paper Deal: The Quest for Contextual Coherence in Contractual Interpretation
...philosophy of the court to which the case is assigned. Hence, beforeStarbev Gp Ltd vInterbrew Central European Holdings BV [2014] EWHC 1311 (Comm); [2015]Bus LR 278; AL Challis Ltd vBritish Gas Trading Ltd [2015] EWHC 141 (Comm); ReinhardvOndra LLP [2015] EWHC 26 (Ch); BG Global Energy Ltd ......