Tony Fernandes has released a statement concerning the current row with new owners over the debacle that has become the Caterham F1 team. It seems, according to AUTOSPORT, that Tony sees things differently than claimed by the new owners:
“In June 2014, I decided, together with my co-shareholders, to sell my stake in the Caterham F1 team,” he said.
“We agreed in good faith to sell the shares to a Swiss company named ‘Engavest’ on the basis that Engavest undertook to pay all of the existing and future creditors, including the staff.
“The continued payment of staff and creditors was so important to me that I ensured that the shares would not be transferred to the new buyers unless they complied with this condition.
“Sadly, Engavest has failed to comply with any of the conditions in the agreement and Caterham Sports Ltd (the UK operating company of the F1 team) has had to be put into administration by the bank, with large sums owing to numerous creditors.
“Our agreement with Engavest was very clear: there was no legal obligation to transfer the shares to them unless certain conditions – which included paying creditors – were met.
“Those conditions have not been met. Our lawyers have asked Engavest several times to comply with these conditions but they have failed to engage.
“If you agree to buy a business, you must pay its bills. They have breached that promise and now, sadly, it is others such as the employees and the fans of the Caterham F1 team that will suffer if the team ceases to race. I sincerely hope that this will not be the case and that a solution can be found.”
Now, having read that, I will admit that I’ve been through a few acquisitions before and while Tony may be correct in stating that the buy/sell agreement included current liabilities, that would be a bit odd as most acquisitions tend to leave the liabilities off the table in what is usually an asset-only acquisition.
Liabilities can be assumed by new owners and typically that’s working liability centered around payroll obligations, insurance obligations and certain accrued liabilities that directly impact employees and other critical operations.
I’m not suggesting that Tony is wrong, the agreement could have had language in it that said the new owners would assume all liabilities in the form of payments to creditors and suppliers etc.
Graham Macdonald, Caterham Group’s CEO, said:
“It appears to me that they never had any intention of paying these liabilities,” he said.
“I go on to question how anyone who was interested in the long term future of the business would appoint one of their cleaners – Constantin Cojocar – as the sole director and shareholder of the UK operating company?
“We continue to see claims and counter claims from the F1 team which are totally unfounded.
“Not only have they failed to pay the creditors (and have even left our shareholders to pay some of the creditors on their behalf), but they have failed to pay us anything for use of our factory and site, or anything for the use of our brand name.
“In short the new owners have paid us nothing and, now the administrators have been appointed, they want to walk away from their liabilities.”
I’m not surprised that a new owner didn’t want to pay the liabilities because that’s typical in lots of acquisition models these days but what is unclear is if the buy/sell agreement signed implied that they would assume all liabilities. That is the crux of the argument.
Sometimes, post-acquisition, invoices can appear that are from suppliers that are critical to the continuation of the business. There is a billing cycle that, for arguments sake, can be net 30 and after the sale, invoices arrive for product delivered the previous month. Now, most buy/sell agreements are vetted through due diligence to catch these liabilities but it is unclear as to if this is part of the issue.
It’s a mess. Caterham’s F1 chief, Colin Kolles, says he’s done all he can to remedy the situation and says that tony Fernandes has refused to speak with the buyer about the ordeal. He says that the new buyers have complied with the terms of the agreement but administrators aren’t seeing the complete picture.
On the upside of all this, the promotion of Cojocar has possibly left an opening for a cleaner and I think I might have a good shot of getting that job. Ley, there is serious advancement opportunities there. You could go from cleaner to CEO in a day so I’m feeling good about the position and my prospects. I could clean this crap up quickly too along with the trash cans in the conference rooms and I would even do windows.
Mike Gascoyne tweeted:
Cant comment on F1 but walked into my office in leafield last week and found an asleep Romanian cleaner, was this the infamous Mr Cojocar
— Mike Gascoyne (@MikeGascoyne) October 23, 2014
Hat Tip: AUTOSPORT
— formula1blog.com (@formula1blog) October 23, 2014