TOTO’S CHEMICAL BROMANCE
On the face of it, Mercedes begins this season unchanged. But a significant deal concluded during the off-season might just point the way to the future of F1.
Team principal Toto Wolff described it as “a turning point”.
Chemicals giant Ineos concluded a five-year sponsorship deal believed to be worth £100million with Mercedes in February last year; in December it doubled down, becoming a one-third shareholder alongside
Wolff and Daimler, which reduced its share from 60% to 33.3%. The deal benefits all parties, enabling
Ineos to scale up its involvement in sport, Daimler to reduce its exposure, and Wolff to cement his place in a high-value role.
Wolff has spent much of the past two years publicly bemoaning his workload and suggesting he was looking to move ‘upstairs’, provided a suitable successor could be found for the hands-on elements of his role. Under the new deal he has not only committed to remaining as team principal and CEO for another three years, but also to increase his stake in the team (previously 30%).
Ineos dominated its field but was hardly a household name until co-founder and majority shareholder Sir James Ratcliffe began snapping up sports properties, including the professional cycling outfit formerly known as
Team Sky. Like Mclaren’s new investors (and, indeed, Red Bull), Ineos has interests in European football, having acquired French club OGC Nice and Lausanne-sport in Switzerland.
How Ineos benefits from these investments remains open to questions the famously publicityshy tax exile Ratcliffe will not answer. The company doesn’t need the marketing clout sport brings, and there are those who say it is a ‘sportswashing’ PR exercise to distract from the negative environmental impact of its business. Others point to how the nature of its acquisitions mirror the buccaneering but hard-nosed way Ratcliffe built his business in the first place: Ineos looked at Premier League outfits Chelsea and Newcastle United but thought them ridiculously overpriced and bought Nice instead, believing targeted investment could elevate it to Champions League qualification status. The Mercedes F1 team already makes a profit but it has also benefitted from the franchise value granted by the latest Concorde Agreement, which imposes a $200million fee on new teams. Mclaren and Williams have also been able to attract new investment thanks to this whopping barrier to entry and the new budget cap arrangements, which in combination make it theoretically easier for existing teams to attain profitability and become more investable.
What makes the Ineos investment a “turning point” is that it amply demonstrates how F1 need not be a money pit. As Mercedes continues to show its rivals the way on track, it’s blazing the trail towards profitability too…