STRAIGHT TALK
LIBERTY’S TOP MAN UNFAZED BY ADVERSITY
Amid Formula 1’s enormous current crisis it’s just as well the man who ultimately calls the shots has always been willing to take on a challenge. When, at the age of 15, John Malone bought a Jaguar XK120 with a seized gearbox, it seemed unlikely the repair he carried out would become a metaphor for his career. Influenced by his engineer father Daniel, teenaged Malone set about stripping the engine and transmission until he discovered a broken gear. Neighbours in Milford, Connecticut, were soon paying him to repair their own cars.
This was an early insight into a man who would make billions building and rebuilding businesses – unafraid of complexity, relishing the opportunity to unlock value others failed to see. All the same, lying under that XK120 back in 1956, it’s doubtful that Malone could imagine one day owning Formula 1.
As Chairman and the largest voting shareholder of Liberty Media, he looks to CEO Greg Maffei and CEO of Formula 1 Chase Carey to plot a way through the COVID-19 pandemic, but a quick look at Malone’s rise reveals this is far from being the first time his companies have faced existential crisis.
In 1972, aged 32, Malone was invited to head Denver-based Tele-communications Incorporated (TCI), a cable television business generating USD$19.2M in revenue but burdened with debt totalling USD$132M. For years he battled tight-fisted bankers who focused on the cost of everything and the value of nothing; value on which Malone kept his sights firmly set.
A Yale graduate with two Masters degrees, Malone used experiences gained while working for consulting firm Mckinsey to help spot solutions. It worked. In 1998 he agreed a deal to sell TCI to telephone company AT&T for USD$48BN, a deal of almost unprecedented scale which set the stage for the creation of the integrated telecommunications, media entertainment and web based services we take for granted each time we pick up our smartphones.
Over 20 years later, Malone’s businesses are still acquiring, merging and growing wherever opportunities arise. Only recently Liberty Global announced a deal to merge its Virgin Media business with Telefonica’s O2 to create one of the UK’S largest entertainment and telecoms firms. In so doing Malone’s company created a joint venture worth £31.4bn and, with over 42m customers across mobile, fixed line and broadband services, a major rival to BT.
Where Malone’s and Liberty’s background of big business deals benefits F1 is that the size and scale of the sport’s coronavirus challenge lies well within their capabilities. Witness the news that they are paying the teams prize monies this year in full, an undertaking which, although contractual, should never be taken for granted in a world where even very large businesses have pressed the pause button on payments.
The 23 April announcement that Liberty Media had injected $1.5bn of mainly cash into the Formula One Group, in return for shifting $2.8bn of Live Nation assets and $1.3bn in liabilities into Liberty Siriusxm Group, might have seemed like robbing Peter to pay Paul, but it is indicative of the strength of having Formula 1 in the hands of a large and diverse media business.
Complex engineering of a financial nature is going to play an important part in helping Formula 1 and its teams survive the present crisis. In this regard, Malone and his lieutenants are better prepared than most.