F1’s owners CVC are set to consider a fresh bid to buy the sport from a group comprising the Qatar sovereign wealth fund and Stephen Ross, US based owner of the Miami Dolphins, via his RSE Ventures vehicle.
CVC has received a couple of bids, including a fresh bid from John Malone’s Liberty Media for 49%. Their most recent bid is understood to be larger than that of Ross and the Qataris, but the latter seems to be the front runner at present, possibly due to terms and conditions. Any bid will have to be approved first by FIA president Jean Todt, owing to the so-called “Don King clause” which gives the FIA a veto right over what it considers unsuitable owners of F1’s commercial rights holding company.
CVC bought the sport from a consortium of banks in 2005 using $1 billion and $2.5 billion of debt financing. They have so far earned around four to five times their money back and this final deal will make it one of their most successful investments ever. Nevertheless CVC’s managing partner Donald Mackenzie said it had been “an alarming company to own.”
It is debatable what state their legacy has left the sport in, however, with no clear strategy, little in the way of investment on infrastructure over the past decade and smaller teams struggling to survive while larger teams share a significant amount of the prize pot among themselves. There are great concerns within the sport, its sponsors, broadcasters and its fan base about long term strategy and direction as numbers decline on TV and heritage venues like Monza struggle to meet the financial requirements to host a race. Ecclestone is also known to be unhappy with the ‘product’ of F1 at the moment, blaming the introduction of hybrid turbo engines and excessive rules and regulations.
CVC sold down its shareholding to cornerstone investors ahead of a planned flotation in autumn 2012, but that did not go ahead as the market conditions were not favourable post the Facebook IPO and also the Gribkowsky bribery case, relating to the sale of the F1 business to CVC, had reared its head in Germany. The cornerstone investors set the potential market value of the F1 business ahead of the IPO at around US $10 billion. The forthcoming bid from Ross and the Qataris is around 80% of that, according to the Financial Times.
The investors are Waddell & Read, a US mutual fund company, which holds a 21 per cent stake, while other shareholders are Norges Bank Investment Management and BlackRock.
The flotation has still not happened. Norges has to exit the investment as it’s not permitted by Norweigian law to hold a stake in a private business.
The cornerstone investors need a flotation or a sale within a certain deadline which is approaching, hence CVC considering a sale. Also there are signs from Brussels that the EU Competition Commission will soon launch an investigation into F1, following an official complaint, believed to be from teams no longer in F1. It is not known whether this has any influence over the timing of a potential sale.
CVC currently holds a 34% stake with Lehman brothers holding 15% and the cornerstone investors the rest, bar Mr Ecclestone’s 5%, which is also believed to be part of the deal. “My shares will be sold together with theirs,” he told the FT.
It appears that he could remain in F1 if this sale goes through, but not necessarily as chief executive.
As for the potential new buyers, Ross is 75 years old and has made a personal fortune of around $6 billion from property and ownership of the valuable NFL franchise Miami Dolphins.
As for the Qataris, they have orbited F1 for some time without committing. There is a Qatar Grand Prix in the pipeline, which now looks likely to go ahead, while Sir Frank Williams has been courting them for years for investment.
It is possible that the recently launched investigations into FIFA and the controversial 2022 World Cup in Qatar have stimulated them into diversifying their sporting portfolio and the opportunity to acquire F1 at this time made sense with Ross the proposed partner.