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.