AB–InBev says CVC owes them money
“Sue me if you can”, seems to be CVC’s attitude in an ongoing spat between AB–InBev and the private equity company CVC. According to the fine print on page 27 of AB–InBev’s recent regulatory filing (25 March 2013), AB–InBev says that CVC owes them money from the 2009 sale of AB–InBev’s central European unit which later became StarBev.
The hitherto undisclosed dispute which has been raging since last year – when CVC disposed of StarBev to Molson Coors – is now headed to court.
In December 2009, AB–InBev sold its operations, known as StarBev, in Bosnia & Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Romania, Serbia and Slovakia to CVC for EUR 1.7 billion (USD 2.2 billion) in cash and other consideration. The deal gave AB–InBev a Contingent Value Right, which is basically a reward to be paid to AB–InBev once CVC itself had sold on StarBev. The Contingent Value Right was pegged to CVC’s return on the investment.
Three years later, in June 2012 CVC disposed of the StarBev business to Molson Coors for EUR 2.65 billion (about USD 3.4 billion). That deal included EUR 500 million of convertible debt issued to CVC, which was to enable them to "participate in future upside" in the business, according to a news release at the time.
AB–InBev believes the terms of the sale to Molson Coors triggered an obligation on CVC’s part to make an additional payment to the Belgium–based brewer.
As we understand it, it looks like the argument is about the value of the convertible debt that CVC has received as part of the payment from Molson Coors. From what we hear, the option element of the convertible makes it very hard to value.
Although CVC has refrained from publically commenting on the case, AB–InBev wrote in the filing that CVC is convinced it doesn’t owe the payment.
AB–InBev did not say how much money they hope to get from CVC. That will be explored at trial, where a panel of “experts” might be asked to agree on a valuation of this convertible debt.
