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CVC sells another stake in F1
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Darren Heath
Posted By: James Allen  |  17 Jun 2012   |  7:03 am GMT  |  38 comments

CVC, the private equity firm that has owned the Formula 1 business since 2006, has sold a further stake to investors, reducing its stake in the sport down to 35%, from the 63% it originally held.

It takes the total received this year by the company from this round of share sales to $2.1 billion. The deals are based on the enterprise valuation of the F1 business at $9.1 billion.

City sources suggest that if and when CVC makes its exit from the F1 business at this valuation, it would be one of the most successful private equity investments ever.

CVC purchased its stake in the sport in 2006 for $1.7 billion from the banks which were left with it on their books after the collapse of media group Kirsch. And it has already refinanced it twice, recovering 1.4 times its original investment and adding more debt to the series to pay for a dividend.

The company had been planning to float the business on the Singapore Stock Exchange this summer in a $3 billion listing, but has now had to put the plans on hold.

CVC sold a 21% stake earlier this year to three cornerstone investors; Waddell and Reid, BlackRock and Norges Bank Investment Management, all three regarded as blue chip funds by the City. A statement yesterday confirmed that a further stake had been sold,

“CVC Capital Partners is pleased to announce that several funds managed by Waddell & Reed Investment Management Company and Ivy Investment Management Company have today agreed to invest a further $500m in a private placement in Formula One at $9.1bn enterprise value, increasing their aggregate stake to 20.9 percent.”

Bernie Ecclestone still controls a 5% stake in the business, which took on a new chairman, Nestle’s Peter Brabeck last month.

The business is based on the exclusive right to exploit the commercial rights to F1 until the end of 2110, a 100 year deal which gave the FIA $313.6 million when it was made, plus a further annual regulatory fee of $7.7 million. CVC and Ecclestone are currently in negotiations with the FIA over their part in the the next 8 year Concorde Agreement, due to start in 2013, with FIA president Jean Todt already having suggested on several occasions that he wants more money for the FIA. It will be important to have the Concorde Agreement signed by all parties before any flotation takes place.

F1 is otherwise in pretty good shape; it has deals in place to 2020 with teams (excluding Mercedes currently) and contracted revenues from TV contracts, circuit licences etc of $5.26 billion to 2016 and $6.5 billion to 2020.

The last 10 years has been a period of great expansion of the business; F1′s revenues have doubled since 2003 from $604 million a year to $1.22 billion while payments made to the teams have gone from $543 million in 2009 to $698 million last year.

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38 Comments
  1. milkboy says:

    Great, more money for the sport I love. Should be great for the teams and fans … oh wait

    1. Wayne says:

      Would be nice wouldn’t it? I love to see F1 respond to fan’s by asking us which are our favourite tracks and offering the hosts an x% subsidy so they can afford to continue to host the races we all love.

      There could be a fan GP of the year every year (Spa, Turky, Canada anyone?), and that particular GP should be offered extra cash, underprivileged fans could be given packages to travel and watch etc etc. Everyone would win, sponsors, the sport and F1 fans!

  2. Aussie Rod says:

    “…a 100 year deal which gave the FIA $313.6 million when it was made…”

    Which equate to little more than $3.1 million a year for the FIA for the remaining 90 years. Meanwhile the rights themselves are now worth $1.22 BILLION a year.

    Surely there’s a movie to be made from that story sometime in the future.

  3. Bring Back Muarray says:

    Made a couple of quid out of that one, haven’t you Bernie!

  4. EdGp says:

    This 100year contract has to be very questionable who made it? and how was it ever in the intrests of the sport for the FIA to sell the rights to there prime asset on a fixed price contract with no preformance terms built into it. How can FIA promote and fund motorsport world wide when the majority of the money in the sport is being taken out of the sport.

    1. Paul Meyer says:

      Deals like that are made at very high levels. FIFA, F1 etc. it’s not in the interest of the teams or the fans. The teams do the work and the fans throw money at the sport (by watching tv). It’s business. Not benevolent support of a sport. Business is about making money. The upside is that if their decisions constitute sound business, the sport should still be around for a while. And in a way we (the fans) “keep them honest” because is they make the sport boring we stop watching. Hence the current season – they’re tying to keep us happy. Because if they don’t, the money dries up. =)

    2. Ambient Sheep says:

      Who made it? Max Mosley.

      Why just $300m~ for a hundred-year contract? Good question, there’s been many rumours.

    3. ChrisS says:

      It was Max Mosley (wasn’t it?) who made the 100 year deal. But it’s definitely a coincidence that he and Ecclestone have always been closely associated.

    4. ben S says:

      Was it not Max Mosely who ratified the agreement with the Bernie Ecclestone? Conveniently?

    5. Basil says:

      Exactly, this stinks!

    6. Anton says:

      None other than Mr Bernard Charles Ecclestone…Method is fairly simple, get your buddy Max Mosely elected as President of the FIA…There you have it.

  5. smf93me says:

    How does the money in F1 compare to the money involved in Le Mans? There are few (any?) mainstream car manufacturers involved in both. I am always astonished at how little TV coverage the Le Mans 24hr race gets, i.e. nothing on terrestrial TV this weekend, despite the epic nature of the race.

    1. MISTER says:

      Loved 24H Le Mans this year. Was my first year watching and following it closely. It’s a shame that those Audi’s don’t have competition. I hope Toyota will return next year. They looked mighty competitive considering they put those cars together in such sort time.

      Anyone knows why Peugeot left the race? I heared they were very competitive.

    2. iceman says:

      According to the BBC sport web site, the only thing that happened at Le Mans this year was Ant Davidson cracked two vertebrae. Oh and courtesy of BBC Scotland, Alan McNish was disappointed to come second.

      Thank goodness for Eurosport!

  6. david mingay says:

    Pawns.

  7. Ben G says:

    Hi James,

    Minor correction – I believe BlackRock were one of the cornerstone investors, not Blackstone – two entirely different organisations.

    On these investors – I would love to know what Bernie told/promised them about all sorts of F1 issues at the time they invested (Concorde, Bernie’s successor, etc) – at least some of it must have come true for them to come back for another bite of the cherry…

  8. Elie says:

    “..F1′s revenues have doubled since 2003 from $604 million a year to $1.22 billion while payments made to the teams have gone from $543 million in 2009 to $698 million last year.”
    FIA have more than doubled (100%) of their revenue but teams received litte more than 40% of that additional revenue. CVC nets a 500% return on its investment. Great business but the guys who make the sport and ARE the “product” don’t seem to get the best deal.

    1. Bradley says:

      The dates are different – the revenue figure is over a 10 year period while the team figures are only over 2 (or 3?) years. So they’re not comparable.

      1. Elie says:

        I know.. Its still a lot of money anyway you look at it. The teams still get little more than 57% (698)of the FIA revenue of 1.22b. Whereas previously they got 543 m of the 604 m (90%)in revenues. FIA must be generating new revenues outside the racing business. Obviously alot of the additional income is related to the previous CVC divestment (313m) but teams got none of that. Would be good to know how all the revenues are derived. Apologies for rattling numbers -off top of my head -professional habbit!

  9. Koby Fan says:

    I’m surprised the FIA’s annual fees for regulatory oversight are so low. Are F1′s exclusive rights for 100yrs granted by the FIA? If they are, CVC got a bargain price..unless there are contractual options for the FIA to entertain a rival series – anyone for Hybrid 1 or E1??

    Be interesting to understand the marketing sell to investors for the IPO. Dividends vs capital growth? There are inbuilt limits to F1′s revenue growth – already at 20 races, 12 teams (a few with financing issues), broadcast revenue, etc. Ultimately, the F1 fan is going to have to pay higher ticket prices and/or pay per view prices (online or payTV)…

    Although I see WilliamsF1′s share price has doubled since Aug last year..mirroring their own track form..no dividends though…

  10. jay jacob says:

    for better or worse, today’s F1 has BE’s success written all over it… with that in mind, i’m worried about BE’s replacement, coz if things are not held tightly, it could lead to the break-up of F1 as we know it today… look across the atlantic : Indy & CART is the result of bad management… hate to see F1 take the same route… this may happen if BE’s replacement can’t manage the new owners

  11. DOC says:

    Mosley Made that deal, together with Ecclestone.
    I wonder if there’s room for investigating it, it’s such an obvious [mod]

  12. Nick Hipkin says:

    Hi James,

    Can I just ask what this is likely to mean for the race going fan who is struggling to keep up with the ever increasing ticket prices?

    1. James Allen says:

      Well if you listen to the most recent JA on F1 podcast, F1 business expert Zak Brown explains that he thinks that rather than price increases, it will mean more content and things for fans to engage with

      1. Nick Hipkin says:

        I do recall this podcast, I am sceptical to this as the on track action is already pretty defined gp2/gp3/porsche’s etc

        The bigger entertainment stands at tracks seem to have gone with the manufacturer teams especially in these harder times.

        I am off to 2 races this year, 1 down on last year and feel the ticket pricing is right on the limit now.

      2. Steve Selasky says:

        Sorry, don’t agree with this one. Unless, you are going to – allow fans to buy paddock passes at reasonable prices or force the drivers to partake in sessions where you engage the fans…. I don’t see this being worth the money.

  13. F1Racer says:

    Just throwing in the gauntalet for conspiracy theories;
    Does this season with 7 winners from 7 races, got anything to do with CVC trying to sell its stake in F1? Probably Pirelli know it more better…

  14. Graham Clarke says:

    All private equity groups should be treated with a healthy level of suspicion, but Blackrock are one of the very worst, the prime example being Southern Cross, in which BlackRock asset stripped the business and left the care of 30,000+ people at risk.

  15. Richard D says:

    It is a great pity that F1 has become more a commercial entity, to be traded, rather than a sport.

    1. James Allen says:

      That’s true of all sports – look at football. SKY and BT have paid £1 billion a year for UK domestic rights! That’s nuts

  16. Onko says:

    Hi Mr Allen.
    I noted on Bloomberg TV,CVC withdrowing to
    borrow $1.8 billion due to cancellation of
    the ipo Singapore listing.
    Mr Allen you are much more in the know is the anything you can make out of it.
    is the concorde agreement water tight in principle with all teams bar one.

    1. James Allen says:

      Concorde Agreement is not signed at this point. However most of the teams have signed individual deals with FOM, except the three new teams and Mercedes

      1. Onko says:

        Thank you very much for the information.
        JA the numero uno.

  17. Stephen Hughes says:

    Wasn’t there talk that the FIA have a clause in the deal that if the ownership of FOM changes significantly then they can get out of the deal?

    Of course we can’t know what exactly constitutes a change of ownership but it strikes me that backing out of the deal could benefit the FIA. It would allow them to offer better terms to the teams as well as take more of the money for themselves.

  18. JamesR says:

    Strange no-one connecting the Gribkowsky trial imminent conclusion and CVC bailing out of F1?

    CVC don’t want their cart hitched to the Ecclestone nag when Gribkowsky is found guilty, apparently the news from Munich is the Prosecutor is talking to Gribkowsky at who’s behest negotiation on some minor charges may be dropped and Grigkowsky co=operates with the court.

    Ecclestone and CVC may have got a little more nervous as they seen the very definite prospect of the good Doctor going down, wondering if Bambino will be safe should decide to sequestrate their fund?

  19. Is it weird that F1 (a global motorsport that travels around the world to different countries) is worth 9.1 billion whereas the English Premier League (which is within one country) is worth 8 billion?

    That isn’t a massive difference and shows that Formula 1 can do a lot more for itself. In a world where Facebook is valued at 100 billion, I’d expect Formula 1 to be valued higher.

    1. James Allen says:

      The more interesting comparison is the TV income. UK only TV rights deal is £1 billion per year. F1 globally is around half that.

      1. JamesR says:

        Are you’re saying the UK (with what, around 2m hardcore fans) combined BBC+Sky charges paying about £50m contribute 10% of the FOM’s global £500m broadcast income?

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