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F1 flotation gets green light in Singapore
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Posted By: James Allen  |  21 May 2012   |  11:18 am GMT  |  48 comments

[Updated] F1 fans could soon be able to buy shares in their favourite sport. The floatation of the Formula 1 business is a step closer after the Singapore Stock Exchange approved the $3 billion flotation of part of the business, according to Reuters and Bloomberg today.

Pre-marketing is set to start on May 22nd, according to a Reuters source close to the deal. The marketing co-incides with F1 putting on one of its most spectacular shows of the season, at the Monaco Grand Prix this weekend.

CVC pre-sold $1.6 billion of stock to three investors including Black Rock in a deal which establishes the value of F1 at $7 billion. It cuts CVC’s stake to around 40% and gives the IPO some credibility if major investment houses have come in.

F1 bosses have met with investors and fund managers to assess interest in the floatation. Last week in Barcelona groups of interested parties were shown around the paddock and pit buildings by CVC’s Nick Clarry and by Fabiana Flossi, Bernie Ecclestone’s fiance. They even made a visit to the media centre, when it was in full swing.

CVC Capital Partners is looking to float part of its stake in the sale, along with other investors. They would however retain a controlling interest in the business. CVC and their partner Bernie Ecclestone, had hoped that the flotation would value the whole business at $10 billion, which would represent a six fold increase on their investment back in 2005. Ecclestone retains around 5% of the business. CVC boss Donald Mackenzie told a court in Germany, which is trying Gerhard Grobkowsky, a former banker involved in the sale of F1 to CVC, that their purchase was “very high risk” at the time because of the threat of a breakaway by manufacturers.

Today, with Ferrari, Red Bull and McLaren taking a seat on the F1 board, teams set to receive 47% of all commercial revenues going forward and the majority of teams (except Mercedes) signed up to race in F1 for eight years from 2013 onwards, the business is in a very different place.

Singapore’s stock exchange, known as SGX, is an ambitious exchange, vying with Hong Kong for high profile listings. Hong Kong had the Prada listing recently, while Manchester United are said to be considering Singapore. SGX president Magnus Bocker is no stranger to F1; he hosted the MotorSport Business Forum in September 2010 along with sports marketing agency JMI, which featured Ecclestone as one of the speakers.

The F1 floatation comes soon after the high profile flotation of Facebook, which raised $18 billion last week. And, co-incidentally, just as Facebook founder Mark Zuckerberg followed that up by marrying his girlfriend at the weekend, Ecclestone and Flossi are set to wed soon.

The Gribkowsky trial was interrupted in February due to the health of the defendant and has since gone quiet.

To keep up with all the latest F1 news, go to our breaking news site JA on F1 Connect

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48 Comments
  1. michael grievson says:

    Wonder if any of them will pay my mortgage now I’m a poor nursing student :o)

  2. Dave Lowery says:

    I haven’t been through the myriad of FOM and related accounts but I expect CVC et al have taken out huge amounts of cash from the business prior to the float – as well as loading the businesses up with debt. Their profit will be huge and probably more than the headline figures suggest.

    The risks facing a listed F1 are huge. No Concorde agreement, succession issues, vocal disagreements between teams over financing and budget caps. Of course, these issues have all been around for a while but in a listed environment (even in Singapore), Ecclestone won’t be able to swat the questions away as he does with the media.

    As with Facebook, there is sure to be lots of initial hype before the reality sets in. The shares will be on a punchy rating and the (complex web of) companies open to more scrutiny.

    As an investor, it’s not something I would be going anywhere near.

    As an F1 fan, I look forward to seeing how the company structure and shareholdings will change in future years…

    For me, Williams F1 is a much safer investment!

    1. michael grievson says:

      I agree. Off topic but I give Facebook 5 years. I laughed at the news they were trailing paying to have a more prominent status update. One step to a paid subscription.

    2. Craig says:

      Agreed.

      The billion dollar question is:-
      Would you buy a used car from Bernard?

      I would rather attempt swimming with sharks in a crocodile infested pool.

      1. Phil R says:

        No one ever did from John De Lorean again…

    3. Ayron says:

      Additionally so with the introduction of new car specifications. While I would love the “cool” factor of owning a piece of Formula 1 as such, I would be very worried that my investment would go south in value…

  3. HFEVO2 says:

    If the teams are due to receive only 47% of the revenue going forward, CVC and Co are still going to be taking more than half of the revenue out of F1 without contributing anything.

    I think it’s a pity that the teams have gone along with this : it will simply perpetuate the ridiculously high hosting fees which inevitably keep ticket prices sky high and ultimately cost us our free to air coverage of every race here in the UK.

    The trend away from popular and traditional European races towards places like Bahrain will continue, much to the long term detriment of the sport, sorry, business.

    Frankly, some of the races in front of empty grandstand look less lifelike on TV that an F1 computer game.

    1. thejudge13 says:

      [mdp]Amen brother!!! (or sister maybe).

      This flotation is the result of a bunch of hedge fund gamblers losing fortunes and needing to make it back from the F1 investment.

      And as to how much they’ve had already – last year alone a dividend was paid to CVC et. al. of $1.5bn (they paid about $100m for the F1 rights from Max Mosely in 2004 – via his mate Bernie).

      Having been to Circuit de Catalunya many times it was interesting, and sad, to see the stadium complex (at the end of the lap) at best only half full. This area seats no less than 40,000 spectators.

      But hey – we can race with the sheiks and soon – the South American dictator’s and military Junta’s and the [mod] Russian oligarch’s, cos they’ll pay the money the real fans can’t afford.

      1. Richard says:

        Why should we not want the sport we love to watch be seen by people in South America or Russia? Surely fans in these countries deserve to be able to watch live races too? And I bet you quite enjoy the Brazilian GP? The “sport/business” is only worth so much because we enjoy the races – if we stop watching the value goes away. Watch F2 if you just want to watch close racing…

    2. Rich C says:

      Yes, its all a scam.
      I’m sure CVC is only a postoffice mailbox in some obscure but expensive retreat.
      There is no office or staff and if there were they wouldn’t actually *do anything.
      The entire circus is completely self-sufficient and runs itself via cosmic ray induction whilst the owners rake in the cash.
      All the contacts contracts and deals happen because those annoying underwear gnomes from South Park finally found something to do.

    3. Offer and demand will always dictate the price elasticity.

      High hosting fees are fine as long as a venue (or state/country) business plan works with regards to the grand prix.

      Non-government backed events such as Silverstone find it tough to make a profit, however, places like Victoria (in Australia) or Singapore make it work because they leverage their grand prix to offset PR/advertising costs as the grand prix is a very cost efficient way to promote themselves.

      Empty grandstands are the result of an organiser/promoter mismanagement due to their inability to understand/talk to their potential customers.

      Events that struggle to get a full house are bound to disappear from the calendar, or at best, alternate. Barcelona, Valencia, Hockenheim/Nurburgring, Spa-Francorchamps and Yeongam (Korea) are first in line.

      Some other grands prix are starting to ‘get it’. China has improved significantly, Malaysia will be getting there and Singapore always manages to sell out. Abu Dhabi are getting help from Silverstone and are on the way to sell out too.

      The thing to remember is that F1 is far more than just motor racing. I think Bahrain understand this point more than just anybody else (not that I approve).

      The day TV spectators have enough of watching F1 racing on meaningless track and audiences drop is the time the sport will take a look at that aspect if it dents profitability.

      In the meantime, world audiences are sky high and the sport is getting traction in more countries than ever before.

      For those who disagree and want to have a say in this, the F1 floatation is a way to achieve this.

    4. thejudge13 says:

      And now we have the news that CVC has sold $1.6bn pre IPO.

      Mmmm. Why would you do this if you were so confident of getting the IPO away. Having IPO’d a company (much smaller) I can hazard a guess why?

      The deal is actually a pre-IPO agreement – subject to certain complex critera – ie only if CVC gets its float away sucessfully.

      It is designed to instill confidence. This is particularly important as the commercial rights holders have nothing (at best 1 years rev stream) without a Concorde agreement that increasingly looks further and further away from being signed.

      This is no good for a floatation as you need guaranteed revenues for a number of years (Hence why this propo9sed Concorde Agreement is for an unprecidented 8 years).

      blackrock are not going to take a punt on ending up with a huge reduced capital value (a loss of $1.6bn on their asstes managed) if this all goes down the pan.

      They will at best have an agreement to receive the first $500-800m in revenues next year and options to sell back shares to CVC at an agreed price – should F1 become F.Libre.

  4. Andrew Carter says:

    Hi James,

    Any chance you can do a piece on the pro’s and con’s for F1 regarding this floatation? Right now I have no idea what this will mean.

    1. RobertS says:

      Yes, what could this mean for formula one? will the teams take a stake in the sport?

      1. James Allen says:

        No, although there was some talk in the Kleinman article in March on Sky News site of Ferrari being able to get a share as they’d been around since 1950.

      2. smellyden says:

        Another reason for Mercedes not to be happy with current negotiations.

      3. James Clayton says:

        Though as a public listed company, teams couldn’t be excluded from buying shares of their own back, could they?

  5. db4tim says:

    What will it open at…:):):):)

  6. Stephen Kellett says:

    Good grief. Avoid at all costs.

  7. Robert Myers says:

    Handy of Bernie to keep 5% for himself. That few hundred million should bump him up the Sunday Times Richlist. Very astute.

  8. franed says:

    This is a bit confusing in several ways:

    Firstly, exactly what is it that is being offered/floated? Is it Delta Topco which allegedly owns the top level of the layer cake of F1 companies? Or is it Delta Prefco which allegedly controls the distribution of the proceeds of Delta Topco (which does not go according to it’s shareholder ratios)? Or both, or yet another controlling layer established just for the float?

    As to CVC retaining a controlling interest, if they float 30% out of their holding it will leave them in the minority. (unless special non voting “B” shares are being floated) Of course it is understood that Bernie has the casting vote of Delta Prefco, with which he is
    capable of completely nullifying any income to floated Delta Topco shareholders. (yet their attraction is the income) As Dave mentions above the debt is huge, recently renewed, and will take a big chunk out of future earnings. (It is also thought that a large lump of cash was taken out of this new loan)

    I am aware that Mr Sylt reads this blog, so please let him correct me. (as he did before)

    Teams should remember that Bernie gave some of them shares a few years ago, and I recall very clearly him a few days later saying to the tv media something along the lines of “yes they have shares, but they are worth nothing”

    Is it a coincidence that at this very time, Flav has got his oar out and is stirring vigorously, muddying the waters? Surely this is not actually to re-create the threatened breakaway series again? Flav was a great friend of Bernie, so unless Bernie wants the float to fail, what else is happening that we cannot see? (Bernie already has the deal of a lifetime with the FIA)

    Bernie is a genius at business, that cannot be disputed, I think there must be something more that will benefit him in this set of circumstances.

    Then there is the matter of LBL’s shares to be sold by the administrator these are understood to be around 15% of both Delta Topco and Delta Prefco. The administrator (PWC) is legally obliged to get the best deal he can on behalf of the creditors, but CVC claim to have an inherent control on the sale of all Delta shares or maybe just a veto. Does this overrule US law? Have CVC counted on buying these back to include in the float? If so they seem to have left it very late.

    The float will establish a public market price for the LBL holding, something which has never been seen before, since all previous sales were private and subject to specific and often distressed or enforced circumstances.

  9. Onko says:

    Mr Allan.
    Is there a chance for any ramification
    should the court in Germany finds that the
    sale of F1 to CVC was outside spirit of
    the law.
    Your thoughts sir.

  10. Alex Bishop says:

    Any news on a share price???

  11. Dan Orsino says:

    James, put me down for a couple of million, if you would

    1. Daniel MA says:

      And also on Williams while you’re at it!

  12. Peter Phelps says:

    This looks like a very risky punt. As mentioned above, what, exactly, is on offer?

    Despite Max and Bernie’s protestations in the past, F1 isn’t just about the race series, it’s also about the teams, and if there was a mass walkout of major teams, as has been mooted in the past, F1 would immediately be devalued. I’m certain the audience would rather watch a GP World Championship with McLaren, Renault, Mercedes, and all their favourite drivers, than F1 with Ferrari racing a few privateer teams.

    Not that I wouldn’t trust Bernie or anything.. But no thanks.

    1. Andrew Carter says:

      And drivers, could you imagine what would happen if Alonso, Hamilton, Button, Kimi and Schumacher all decided to call it a day in the space of a couple years?

      Yes, other driers would fill the void but it would take them a few years to build up such strong reputations.

  13. Chauncey Gardener says:

    I think that Nick Leeson is leading the floatation

  14. Tim says:

    Hopefully all the schemers within F1 get a wakeup when they float this. Even the mighty Facebook showed it was more hype than substance to many investors’.

  15. Thompson says:

    I cannot help but feel this is part of Bernies plan to ruin F1 just before he turns up his heels. We all know he won’t live forever and he has established a global show that generates cash second to non.

    But in the past few years looks like he is doing everything to ‘cheapen’ F1.

    step 1 – gimmicks DRS, KERS, tires.
    step 2 – take it off free view tv
    step 3 – sell it to people who value profit above all else, just a question of time now before we have the cars shooting lasers and going around loop the loops in the name of entertainment.

    tragic…..

    can anyone recall in recent times some real historic sport reel moments in F1. I can’t.

    1. f1fansince11 says:

      Loop the loops entry music and signature tricks from each driver and team (performed to impove laptimes) f1 needs if it is to really appeal to the largest markets.

      I however am looking forward to the breakaway series that features the fastest cars, it’s a joke that some of the fastest times seen on f1 tracks were set in 2004!

      1. f1fansince11 says:

        *error on first comment – sincere apologies

        Loop the loops, entry music and signature tricks unique to each driver and team (performed to impove laptimes)is what f1 needs if it is to really appeal to the largest markets.

        I however am looking forward to the breakaway series that features the fastest cars, it’s a joke that some of the fastest times seen on f1 tracks were set in 2004!

  16. Nigel says:

    Deeply unattractive investment…
    I’d rather have a punt on the result in Monaco.

    Very interesting strategy calculator again, James.

    Two stops seems to be the obvious way to go – three stops is both slower and loses track position, while one stop gives such extreme tyre falloff that it ought to be possible for two stoppers to pass even though it’s Monaco.
    (I really don’t know why the Pirelli spokesman is suggesting teams will run several different strategies, if your calculator is anywhere near correct – and it’s been pretty good this year.)

    The option is significantly faster, and plenty durable. Running the prime in Q1 is quite feasible this time, so it ought to be possible to save a set of new options. Even if it’s not, the scrubbed option still looks quite decent.

    With one set of new, and one used options, my best race time is a good 35 sec faster than your benchmark. Two sets of used options are faster than using new primes, and still around 30 sec faster than your time (though clearly give less flexibility on which lap to pit).

    Qualifying on pole (and leading at the end of the first lap) is probably preferable to conserving tyres in qualifying – for the first time this season.

  17. Andy says:

    I don’t think there would ever be a mass walkout by the teams. They created FOTA which is falling apart. F1 being as it it is, means that they are far too competitive to work together. The Resource Restriction Agreement they agreed on failed because some were trying to cheat it. Bernie knows this and the only outsiders appear to be Mercedes, who seem to think thay after buying a team two years ago justifies them a seat on the board.
    Bernie, like him or not, has the main players on board. Car companies in F1 will come and go, it is nothing more than a pr exercise, BMW, Honda, Toyota, and maybe Mercedes.

  18. Richard says:

    teams set to receive 47% of all commercial revenues going forward

    Do you mean ‘in the future’ James?

    1. James Allen says:

      That’s the deal from 2013 onwards, one is led to believe

    2. terryshep says:

      Stony ground, Richard, ‘going forward’ has now replaced ‘in the future’ as ‘for sure’ has replaced ‘certainly’. Nice try, though.

  19. Eje Gustafsson says:

    Sounds like a exit strategy CVC knows Bernie is getting old and [mod] there is no clear and cunning successor so let’s cash out on a stock floation now, give the team some but not enough and there is no good replacement that is when they sell their remaining shares… Clever clever..

    1. Enzo says:

      I thought the former Canadian GP boss (forgot his name, sorry) had a good chance.
      Ron Dennis and Flavio Briatore had some “disputes” during their career, so i don’t think they’re an option.

  20. Nigel says:

    Oops…. race strategy: forgot the pesky requirement to run both the prime and option.

    I guess the prime should be run in the final stint. Using the faster option in the second stint ought to help prevent (or enable, if you’re running second) the undercut.
    And for this reason, saving a new set of options could still be important if it’s close at the front.

  21. tom in adelaide says:

    My gosh, who would go anywhere near this?

  22. SK Anand says:

    Dear James,

    I think this is good for the sport. Though it will be interesting to read the Red herring Propectus (DHP) to understand in detail the revenue model of the company, and how it will benefit the various stake holders.

    Though there are few issues that needs to be kept in mind before the issue is floated on the Singpore, and i am certain the managers and the underwriters will be looking at it :

    - Though Mercedes may not have had a great record in F1, it is a marque name, and an agreement with it is likely to increase the valuation of the business

    - The Greeks go to poll in 4 weeks, and people are looking at a fractured verdict once again with cry growing louder that they could exit the euro zone. Conservative estimates place a greek pull out from the Euro to cost the Europe at least US$550 billion largely due to the default of Greek on its loans

    - Investors will also look at the fact that of the 20 races, 8 are in Europe and especially in countries Spain, Italy, and Hungary, where there is considerable amount of financial troubles. This could impact the valuation

    - JP Morgan is still reconciling from its trading losses, and thus far we donot know if there is interconnectivity with other banks involved

    - Though the headlines are bad, the investors always look at the stock for its intrinsic value for the investment

    - The Facebook IPO will have a bearing on the headlines news, though the business model of F1 and Facebook are largely different

    In the above light, i will not be surprised if the floatation is pospotned to a later date in order to get a valuation and the prospect of some amount of over subscription.

    Sincerely,
    SK Anand

    1. SK Anand says:

      In an additional news, Blackrock and two other firms have done a pre IPO deal with F1, and have picked up US%1.6 billion dollar in F1. With this, CVC stake is now down to 40% from its initial level of 63.4%. Analyst put the valuation of F1 at US$ 9.1, with an equity of US$7.2 and debt of US$1.8b.

      The sale of process at this level would mean the now bankrupt lehmen brother who owned 15% of Formula 1, will be able to generate at least US$1.35 billion to pay of its debtors

  23. Hope they know what they’re doing. Facebook’s flotation sorta kinda flopped (because they’re heading MySpace way anyway), if you believe the news. Not an expert in this area myself but it seems like the epitome of capitalism – money made out of nothing. F1 is definitely the epitome of capitalism so it does fit.

    1. franed says:

      I’m over 14 so Facebook does not bother me. But I find it’s valuation crazy, rather like the tech bubble of around 12 or so years ago. Unfortunately this valuation is given by organisations who have in recent years proved that they are guessing as much as we do. But their mistakes are much bigger JP Morgan now thought to have lost up to 3 billion $ but $13Bn have been wiped off the company value in the share price.

      1. For a kid you know a lot more about economy than I do! That’s all I can say.

        F1 fans aren’t having enough fun these days, just as the teams, apparently. Jo Ramirez was right: it’s all work now. Back in those days they worked hard but played hard.

  24. Elie says:

    It’s interesting that the flotation is being used to test the value of f1. I would think it wise to postpone the public offer till after the US GP as that would generate even greater interest . However, if the public offer fails to generate the the value all key players seek, the teams should consider breaking away as they did a few years ago. The direction F1 has taken since had been backward. Long term interest in the sport will always be the technical excellence and speed that the pinnacle of Motorsport should be. It’s clear now that all the “gimmicks” introduced were made to raise greater interest to non racing people prior the key owners slowly divesting and loading up their wallets in the process.

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