New York – Judge Rules AriZona Iced Tea Co-founder, Son Owed $1 Billion For Buyout

New York – A New York state judge ruled on Tuesday the privately held producer of AriZona iced tea should pay about $1 billion to buy out the half of the beverage maker owned by the co-founder and his son.

Nassau County Supreme Court Justice Timothy Driscoll arrived at the amount the company must pay John Ferolito and a trust set up for his son after determining the value of Beverage Marketing USA Inc and its related entities approached $2 billion in 2010.

The valuation was below the $3.2 billion that Ferolito had argued the company was worth, but well above the $426 million its managing co-founder, Domenick Vultaggio, had pegged as its value.

Ferolito’s lawyers have argued the company’s value was in the billions of dollars, pointing to offers from suitors including Tata Global Beverages Ltd, Nestlé SA and Coca-Cola Co.

Vultaggio countered the company faced insolvency if the value was pegged too high. Driscoll declined to adjust the value of the Ferolitos’ shares based on that claim.

“Such an adjustment could provide Vultaggio with a windfall he could easily exploit if he decided to sell the shares he acquires from the Ferolito parties,” he said.

Driscoll said further proceedings were necessary to determine the exact amount to be paid and the terms and conditions of the payout. A hearing is scheduled for Nov. 3.

“We are grateful for today’s decision that draws years of protracted, unnecessary litigation to a close,” Nicholas Gravante, a lawyer for Ferolito, said in a statement.

A lawyer for Vultaggio had no immediate comment.

Woodbury, New York-based Beverage Marketing and its related companies have 1,000 employees and annual sales of $1 billion, Vultaggio’s lawyer has said.

AriZona had a 37.4 percent share for U.S. ready-to-drink tea by case volume in 2013, according to Beverage Digest, ranking No. 1 above PepsiCo Inc’s Lipton and Coca-Cola.

Driscoll’s ruling followed a non-jury trial and six years of litigation between Ferolito and Vultaggio, onetime friends from Brooklyn who launched AriZona in 1992.

In 1998, as part of an agreement in which Vultaggio would operate the company while Ferolito moved to Florida, the two agreed to restrict the transfer of company stock to outsiders.

By 2005, Ferolito wanted to sell his stake and began pushing for a corporate sale. Vultaggio refused, prompting Ferolito to ask a court to declare the stock sale restrictions unenforceable.

Following unfavorable court rulings, Ferolito filed a lawsuit to dissolve Beverage Marketing. Vultaggio later elected under state law to buy out his partner.

Later court rulings allowed Beverage Marketing itself to buy Ferolito’s stake. The case now covers all AriZona entities.

The case is Ferolito v. AriZona Beverages USA LLC, et al, New York Supreme Court, Nassau County, No. 004058-12.

(Reporting by Nate Raymond in New York; Editing by Jeffrey Benkoe and Meredith Mazzilli)

Word Count: 475