The sale of F1 is great news for fans

F1 Racing - - INSIDER - DI­ETER RENCKEN

with CVC about ac­quir­ing a raft of shares, in­clud­ing those held by in­vest­ment funds Wad­dell & Reed, Black­stone and Norges (Nor­way’s sovereign wealth fund). The lat­ter is un­der­stood to be un­der pres­sure to exit F1 ow­ing to conict over al­co­hol spon­sor­ship.

Lib­erty is ma­jor­ity-owned by John Malone, who worked his way up from the elec­tri­cal engi­neer­ing bench to be­come the USA’s largest landowner, with 2.1m acres of prime prop­erty via his var­i­ous con­glom­er­ates, and seats on boards of blue chip com­pa­nies.

What set the Lib­erty ru­mour apart, though, was that vir­tu­ally ev­ery pad­dock gure this au­thor spoke to was bullish the deal would be com­pleted. “Within three to four weeks,” said a source au fait with Lib­erty’s modus operandi. He was equally cer­tain that the deal would benet F1 – more so than the cur­rent ar­range­ment, in which the in­vestors have ex­tracted around $3bn over ten years.

It came to pass a fort­night later, with the me­dia gi­ant ac­quir­ing a mi­nor­ity stake (18.7 per cent) in FOM’s par­ent com­pany Delta Topco in a trans­ac­tion termed ‘First Clos­ing’. This en­ables Lib­erty to pre­pare a ‘Sec­ond Clos­ing’ to up their stake to 35 per cent (fore­cast for the rst quar­ter of 2017) while at­tend­ing to EU Com­mis­sion is­sues and fram­ing FOM’s fu­ture di­rec­tion, with a New York Stock Ex­change list­ing be­ing the end game. CVC re­main a share­holder, while out­side share­hold­ers can hold on to their in­ter­ests, sell to Lib­erty, or take their chances on any IPO.

The ru­moured val­u­a­tion of F1’s com­mer­cial rights proved op­ti­mistic at $8.4bn, with the agreed en­ter­prise value be­ing around $8bn al­though ac­tual trans­ac­tion value is half that due to debt obli­ga­tions. Still, $8bn rep­re­sents around 20 times the sport’s gross an­nual rev­enues, so Lib­erty clearly sees enor­mous po­ten­tial in F1.

Ini­tial in­di­ca­tions are that F1’s 85-year-old CEO Bernie Ec­cle­stone, who trans­formed the sport up from a fringe ac­tiv­ity fol­lowed by petrol­heads to one of the world’s top three sport­ing prop­er­ties, will re­tain his po­si­tion dur­ing a three-year tran­si­tion pe­riod. How­ever, in­sid­ers see that as a soft re­tire­ment op­tion, with han­dover ef­fected within a year. Malone has wooed ex­pe­ri­enced me­dia ex­ec­u­tive Chase Carey from Fox to chair the in­vest­ment. The im­pres­sively mous­tached Carey is ex­pected to in­sti­tute a whole­sale re­struc­ture of FOM ready for a new-look F1 from 2021, when cur­rent con­tracts ex­pire. “I know the way Malone works,” said one source. “There will be no sa­cred cows. Lib­erty will look at ev­ery as­pect, from broad­cast deals to week­end for­mat, and the teams are likely to benet the most. They’ll look at it from an Amer­i­can per­spec­tive, which means NFL-type treat­ment of fran­chises [the teams], and salary [cost] caps. All in, it’s very good news for us.”

An­other source ven­tured that Fiat/Fer­rari boss Ser­gio Mar­chionne and Mercedes CEO Di­eter Zetsche would “stand no chance [against Carey], and Bernie will meet his match when push comes to shove”.

The burn­ing ques­tion is, of course, just what do Lib­erty see in F1 that en­ticed Malone to part with $1.2bil­lion for the ini­tial pur­chase? The EU Com­mis­sion is cir­cling, teams are bat­tling nan­cially, TV rat­ings are shaky, and host­ing fees have hit a ceil­ing.

Clearly, though, he sees gold at the end of F1’s rain­bow-coloured grid, and, if the deal re­sults in no more than trans­fer­ring con­trol of F1 from the clutches of ven­ture cap­i­tal­ists to the sea­soned hands of me­dia pro­fes­sion­als, fans should be grate­ful. The caveat, though, is: Be care­ful what you wish for…

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