By Mike Esterl
The feuding co-founders of Arizona Beverage Corp. have reached a
preliminary settlement that would allow one to buy out the other,
potentially ending a yearslong valuation dispute over the iced tea
maker.
The agreement allowing Domenick Vultaggio to buy out John
Ferolito's 50% stake in the privately held company for an
undisclosed amount still requires final court approval, which could
come as soon as next week.
Nassau County, N.Y. Supreme Court Judge Timothy Driscoll has
been weighing how much Mr. Vultaggio must pay Mr. Ferolito to take
full control. Judge Driscoll estimated last October that the value
of the maker of Arizona iced tea "approached" $2 billion as of
October 2010, when the legal dispute began.
Arizona Beverage had an estimated 23.7% share of the $5.32
billion ready-to-drink tea market in the U.S. last year, according
to market researcher Euromonitor. That put it behind only Unilever
PLC and PepsiCo Inc., whose tea joint venture is headed by the
Lipton brand.
Attorneys representing Messrs. Vultaggio and Ferolito declined
to give the price of the proposed transaction, citing a
confidentiality agreement.
Mr. Ferolito, who stopped being involved in day-to-day
operations several years ago, had argued earlier that the company
was worth $3 billion to $4 billion. Mr. Vultaggio had argued its
value was closer to $500 million.
Until now, Messrs. Vultaggio and Ferolito and their families
each have controlled 50% of the company. Mr. Ferolito began
exploring selling his stake roughly a decade ago, but was blocked
by Mr. Vultaggio.
The estranged Brooklyn friends became business partners in 1971,
delivering beer in New York City with a Volkswagen bus. They
launched Arizona and its Southwestern-inspired label motif in 1992,
eventually taking the iced tea brand national.
Nicholas Gravante, an attorney for Mr. Ferolito, said Tuesday
the proposed settlement is "in the best interest of all parties."
Louis Solomon, an attorney for Mr. Vultaggio, said his client is
also hopeful the settlement will be approved.
A final settlement could open the door to Mr. Vultaggio selling
a stake in the company to another investor. Coca-Cola Co., Nestle
SA and Tata Global Beverages Ltd. expressed interest in buying some
or all of Arizona before the co-founders took their dispute to
court, according to court documents.
Mr. Vultaggio has no plans to sell, said Mr. Solomon, his
attorney.
As part of the proposed settlement, Arizona also would cover Mr.
Ferolito's legal fees.
Write to Mike Esterl at mike.esterl@wsj.com
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