CVC’s response to Exor-News Corporation

While Bernie Ecclestone and his sidekicks are still saying that the Formula One group is not for sale, CVC Capital Partners has said no such thing in a statement put out this morning.

“CVC can confirm that it has recently received an approach from the Exor News Corporation consortium.
James Murdoch has informed us that the approach is friendly, at a very preliminary stage, and that they acknowledge that Formula 1 is privately owned by CVC and not currently for sale.”

This means that Murdoch has been told that the business is not for sale, not that it is not for sale…

“CVC recognises the quality of Exor and News Corporation as potential investors, but any investment in Formula 1 will require CVC’s agreement and will need to demonstrate that it is in the interest of the sport and its stakeholders, taken as a whole.”

Any private equity company will by its very nature be interested to hear what a potential buyer has to say. CVC Capital Parters exists to profit its investors and if there is a deal that will do that, then the chances are that the company will sell.

If not, then there is no reason to sell.

45 thoughts on “CVC’s response to Exor-News Corporation

  1. It’s certainly real isn’t it!. The $64,000 question now will be the quality of the due diligence information made available to the potential buyers.

    I assume Newscorp won’t make the purchase on a whim, and if the information provided by CVC is incomplete, in a mess, confusion or in some way dodgy this is going to affect their ability to satisfy themselves of what exactly they’re buying.

    The world is littered with people who’ve been stung one way or another by Bernie, and I’m sure there are a fair few hare traps laid in the web of contracts, ready to ensnare the unwary.

    I could imagine newscorp happily buying everything only to discover that they didn’t own the rights to a 1 metre strip of tarmac at the end of each pitline!!

  2. I know I’m lumping Bernie and CVC in the above post, but whilst CVC can open the books, it’s Bernie who REALLY knows what’s on each page, and why.

  3. “This means that Murdoch has been told that the business is not for sale, not that it is not for sale…”

    Could you rephrase that for me please Joe? I wasn’t entirely sure what you meant by that but realise that it’s probably the key point to take from the statement 😉

    1. Robert McKay,

      The press statement was very carefully worded. It said that Murduch had been told that the business was not for sale when he asked about buying it. This does not say that this is business is not for sale NOW. It is a subtle but important distinction.

  4. If it ends up no longer on free to air TV, that’s certainly not better for the viewing public, who are part of ‘all concerned’ and presumably is at least under consideration by Newscorp.

  5. Certainly CVC will be pleased by this interest and will be looking forward to seing News Corp&Co look at the potential of a deal as well as getting other groups involved as well in the coming months.

    Certainly they will not finish a deal befor a new Concorde Agreement is signed, giving enough time to look at the views of EU and other regulators of the matter and preparing provisions into the new concorde agreement.

    Also it gives the opportunity of actually having interested parties present a bit of their vision of what to make of F1 to actually give all involved more value for their bussiness (that means all of FOTA, FIA, CVC and the new buyer as well as major sponsors).

    Certainly this would not just mean Murdoch putting F1 behing a PPV box worldwide. That would not be acceptable for FIA and most FOTA teams and sponsors. It might actually show a new balance of governance with sponsors (Slim), teams (Ferrari and Fiat owners Exor) and media involved in the ownership.

    News Corp and its partners can be the ones having interesting content to bundle for different platforms from simple sattelite/cable TV, through internet view and mobile content for tablets and phones, complete with advertising/sponsoring deals into the bargain. Something FOM has widely neglected for now.

  6. Hmm… Mr E is vocal along with Ferrari on the issue against the turbo 4 cyl, probably trying to pull them away from the other manufacturers in FOTA. Now Ferrari is involved in buying the whole business. Am I thinking too much or might these two things related and Bernie is on both sides of the deal again?

  7. It would seem that James Murdoch has recognised the primary weakness in the current FOM business strategy.
    The present structure is based on a diminishing income stream in FTA TV and fees from circuits/governments/promoters etc while almost totally ignoring the high growth digital delivery to new outlets.
    As an example the Australian AFL, a single country sport with a population of arounf 20 million and zero potential for marketing overseas has just wrpped up the sale of it’s media rights for A$1.25 billion. The FTA rights were around 35% of that with cable, satelite, 4G wireless and other digital and net based delivery making up the rest. That is where the future is in convenience, picture quality, bolt on features and interactive ability.
    Bernie has ignored that market, even delaying HD, and that just goes to prove he is yesterdays man.
    Newscorp, Jean Todt at FIA and the FOTA teams know it and CVC are waking up to the fact.

  8. @cloggie – I am also interested in hearing the opinions of Tracey, aged 23, from Essex, as to the latest aerodynamic or engine developments.

    To be serious though… As Joe posted a few days ago, nothing is free anymore and by paying the BBC licence fee it can not be considered free either. I think it is a matter of perceived costs. BBC, etc is considered free as you pay your whatever-it-is, and that is it. People are worried with Sky that the costs are higher anyway – then they could add live races as a premium pay-per-view – sort of like they do for boxing for example.

    Would I subscribe to Sky just so I could watch F1? Actually I doubt it. I suspect I am not alone with this thought.

  9. I can’t see anything good coming from Ferrari and Murdoch owning the rights to formula 1. I can’t imagine FOTA or the FIA will be too happy with that arrangement either.

  10. (Dons flame-proof underwear first!)

    So, Ferrari aren’t content with Jean Todt’s FIA – it’s not providing enough Assistance anymore, so they decide to get into buying the whole damn shooting match instead!

    I may be wrong, of course …

  11. Bye bye Bernie? This looks like a way of marginalizing his influence and getting rid of him before he becomes too much of an embarrassment. Martin Sorrel is a smart guy and his extensive corporate knowledge and credibility make me think he has more than a hand in this. But, for heavens sake, please keep Luca away from the top table!

  12. All I can say is that if F1 goes pay-per-view, then that’s the last time I’ll be watching it. Not because of any ideological objection, just that a) I’m a cheapskate, and b) I would have to submit such an outlay to my purchasing department.

    She, without a doubt, would decline it forthwith as a frivolous request.

    Ah well… F1, I shall miss you should you go.

  13. @joesaward Yes the key element in the statement is “… not currently for sale.”

    Would the investment by Exor/News Corp be worthwhile if Sky/Star didn’t get the broadcast rights and Ferrari get a boost? That is, would it be a profitable investment to anyone with sufficient money?

    Part of the CVC statement seems to imply that they would be willing to have them as “partners” and are maybe looking to cash in some of their share. But perhaps that’s just the usual form of words.

  14. Joe,

    “Perhaps Ferrari is on both sides of the deal…”

    i always liked paying myself a commission in such circumstances, cuts out the middle man 🙂

    in a flippantly good mood, forgive me, left alone at desk with good news to spread and the lazy so and sos are at lunch, grr. .

    thanks again, you’re really on top form, good people always do best when it’s fast.

    – j

  15. Looks like nifty work by Ferrari.

    If the Concorde negotiations don’t go the way they want, they can demonstrate they have rival backing for a breakaway series. If the Concorde arrangement is renewed, and CVC sell, they could end up with an even bigger slice of the F1 pie, through Exor.

    I’m not sure how the other teams might view it though. Isn’t it a bit like the Glazers trying to buy the Premier League?

  16. News corp will not be buying it to benefit sports lovers. They will put it on pay tv in as many countries as it can. CVC will not care what happens after its sold. They just want to make a profit on the sale. The teams will want it on free to air to get more people watching it and thus sell sponsorships for a bigger audience–thus a conflict of interest. It won’t go ahead.

  17. Joe, you say CVC have not joined Bernie in saying F1 is ‘not for sale’ but then quote their press release which says “F1.. is currently not for sale”!

  18. I’m not clear how television is bought and sold in the UK. In Canada and the US we do not get the races for free and they have commercials. In Canada it is a BBC rebroadcast live on TSN (horribly edited, sometimes no sound, never an introduction, seldom a post race) the Americans get a quality broadcast on Speed tv, but both these channels are premium and cost a monthly fee.
    NASCAR has an entire package that you can buy for the season or by the race; high definition, amazing in car cameras that will swivel 180 degrees on 6 channels, cameras everywhere, multiple cameras on the pits so you see each pit on your screen at the same time while one frame still covers the race.
    I welcome pay tv to F1. I would willingly pay $20.00 per race to have the coverage NASCAR broadcasters provide. That’s about $6.50 per hour for first rate, multi channel, high def entertainment; no transportation costs, no $8.00 hot dogs. It would be a bargain in todays world.
    On the ownership thing. CVC is a company that’s business is money, Murdoch is in the communications and entertainment business. I would think that F1 would be better served by a company that has grown itself through increased patronage, growth and communications aquisitions, then they are by a company that strictly exists to buy and sell things.

  19. Just because newcorp doesn’t have a profitable Free TV network in your market doesn’t mean it always won’t. Murdoch is a very cunning man. If one were to set up free to air TV stations and internet/phone streaming operations in multiple markets F1 would be a great asset that guarantees an audience. And I would imagine that one could sell ads to make money.

    It sure seems like F1 would be a $5-6 billion purchase. Considering that “American Idol” grosses over a billion a season it seems that this could be a good gamble worldwide. Much better investment than myspace and that was in the same ballpark.

  20. Joe,

    Is there any stipulation in the contract between CVC and the FIA that prevents the commercial rights holder to be a stake holder in any of the teams?

    seems like a logical clause to have, but you never know.

  21. The talk of Pay-Per-View is being Hugely overblown.
    A wholesale move to PPV will Not happen, it can Not happen. Neither the teams nor the FIA would allow it, and both have a veto. It will never even be a negotiations point, unless as a ruse News Corp could then pretend to have conceded.

    This general assumption that News Corp could move F1 to pay-per-view is not only incorrect, it truly misses the real issue.

    News Corp could make *boatloads* of money even if basic race coverage in currently free markets stayed on free-to-air TV. They’d earn their massive amounts of cash by holding the rights fees at current levels. A bit more would be earned by enhanced pay coverage and internet viewing, but the real story here is the rights fees lock in.

    They way Formula One currently works is that FOM (Bernie & CVC) put the broadcast rights up for open bid in markets across the globe. They then pay the teams a percentage of the returns. These fees have grown dramatically through the years as the sport has grown. Open bidding means that rights fees to continually grow to match market rates.

    Were a media company like News Corp to purchase F1, there would be far less open bidding for the rights. News Corp owns media companies in many major markets, they would simply sell the product to themselves in those markets. News corp would not pay market rates, there wouldn’t even be a way to gauge market rates. The market *value* would continue to grow as ever, but without open bids, that real value would be a mystery. A such, the teams would not receive a fair market share, they’d be eternally locked in at current rates with News Corp getting the benefit.

    News Corp would probably offer the teams a short-term payout to offset the lack of market rates going forward, but it would be a sucker’s bet were the teams to accept it.

    As I’ve said previously, the teams would be barmy to allow any new owner to rescind the practice of putting the broadcast rights up for regular and open competitive bidding. Without open bidding, there is absolutely no way to even Guess at fair market rates.

  22. Sorry but I am still confused by the ownership structure. Going back to Joe’s brilliant chart here,

    Is Alfa Topco owned 100% by Delta Topco?
    Likewise are Beta Topco1, Delta2 and Omega Group all owned 100% by Alfa Topco? and so on down each branch, or do others own parts of the many companies in the stucture?

    As I wrote elsewhere, it would be quite possible to imagine one was buying the whole caboodle, only to find that Bernie still had control of it.

    I would also like to chuck in the notion that since the bribes to the fella sitting in a German prison were traced to Bernie, via two of the companies on the chart (near the middle of it), then Bernie must have sufficient control of them to order them to dispense large sums of money. Or maybe the money was not paid and it’s all a dream!

  23. @ Brent,

    We’d be lucky in the UK if it was any less than £30 ($50) per race as my guestimate. I’ve watched every F1 race bar about 4 since 1996, I love F1 but I don’t love it enough to pay £500+ per year to watch it.

    It’s my opinion that it would be re-launched for the lowest common denominator, They’ve said themselves they want it to appeal to the young’uns.

    it will probably go the way of Touring Cars, a series of sprint races to allow ads and hold the attention of the young ‘uns.

    Incidentally, I had watched every BTCC race for many years. Haven’t seen one in around 4 years since they tried to ‘improve the show’ and ended up ruining it.

    I hope F1 doesn’t go the same way.

  24. Joe, I’m not that knowledgable about how businesses on this scale operate, but is there any way Formula One could ever own itself, if that makes sense? To remove the potential for people like Murdoch, the enemy of competition and free speech, to have any control or influence in F1 at all.

  25. @david hodge: currrently coinducting some winftunnel research on Project Tracey and the effect of speedbumps…..

  26. @ brent: sorry to disagree: the Speed coverage of F1 is horrible, though I agree about TSN. Since I moved to North America I have often thought one of the real issues in getting F1 across to a wide audience was in the packaging. Compared to the ITV and BBC product, that which is available (and all is paid for) there is little of real informative value. To a newcomer it must be very confusing and shallow. Compared to the PPV service offered a few years ago by BE, the modern programming leaves a lot to be desired. Given the availability of technology at the circuits during race weekends and testing, it is such a shame: there is endless quality material available and yet most of it never reaches the consumer. For examples, look at the edits that are done post-race and post-season. These give some indication of how much good stuff never get used. One hopes that if the sport is bought by media people they package it well. My real concern is that it will be packaged for the gladitorial spectacle and will thus disappoint aficionados of the sport. Dumbing down inevitably rakes in the dollars, unfortunately. Though often only in the relatively short-term. Historic GP offers a lot of what I miss about the “good old days” and I am lucky that in N. America there are a number of opportunities to go view.

  27. Is Exor and News Corp deliberately trying to confuse?

    “Formula 1 is privately owned by CVC and not currently for sale.”
    “This does not say that this is business is not for sale NOW. “

  28. Within the press release is a comment about the long term future of Formula One.

    Sky obviously have their eye on the future; the viewing figures per race, twenty times a year, across five continents, would make any advertising man salivate!

    Any new owner of F1 needs to encourage growth and the best way to do this is via the internet with It’s about the periphery activity that goes on in F1 that can make great tv…

  29. Is Vince Cable an F1 fan, he visited Cosworth ahead of the 2010 season. I can just see him shaking hands with J Murdoch at Silverstone lol. By the way, Silverstone has an E at the end JL.

  30. rpaco wrote:

    “As I wrote elsewhere, it would be quite possible to imagine one was buying the whole caboodle, only to find that Bernie still had control of it. ”

    Which is exactly what happened the first two times Bernie sold the sport. Both Kirsch and EMTV assumed they had bought F1, only to later learn that Bernie maintained control of the companies through a truly opaque puzzle of shell companies.

    This tangle of companies started to unwind after the banks who had backed this folly foreclosed and took ownership of the rights Bernie had sold. At the behest of the banks, the now infamous Gerhard Gribkowsky successfully sued Bernie for control of the important parent companies.

    Bernie has not actually had full control of the F1 companies since that time, over half a decade ago now. After pushing Bernie aside, the banks set upon untangling the spaghetti map of shell companies in order to prepare the whole for sale. Upon purchase, CVC wound them in further. The sparse grouping we see today is a shadow of the tangled knot that once existed.

    I don’t expect News Corp or Exor to be similarly maneuvered into buying an empty sack. While they may not always make sound investments (see Myspace), they can be relied upon to perform enough due diligence to actually acquire control of the companies they purchase, especially when the price tallies in the billions.

  31. StephenAcworth wrote:

    Bye bye Bernie? This looks like a way of marginalizing his influence and getting rid of him before he becomes too much of an embarrassment. Martin Sorrel is a smart guy and his extensive corporate knowledge and credibility make me think he has more than a hand in this.


    I share your opinion.

    Clearly, Bernie is not a party to News Corp’s offer. His terribly dismissive attitude towards the entreaty make this evident. I suspect this sale has been driven by CVC’s retirement-fund backers and Mssr. Sorrel both desiring to see the back of Bernie.

    Why? Largely because of Bernie’s embarrassing involvement with the Gribkowsky affair. I suspect they know some ugly truths are yet to be revealed. I suspect they want done with him as soon as is fiscally responsible.

    The problem for CVC is that that sacking Bernie prior to selling the F1 rights would put the value of the F1 investment at definite risk. He is the glue of the sport, the only man who has consistently wrangled the teams and the FIA into successive Concorde agreements.

    The obvious and prudent way for CVC to dissociate themselves from Bernie without diminishing the value of their F1 investment is to sell up entirely.

    This also neatly explains why Bernie has not been approached by News Corp or Exor. Bernie is not being sold along with the companies.

    As such, I believe Formula One is *definitely* for sale. The difference this time is that Bernie is not doing the selling, it is Bernie that is being sold out.

  32. Random,

    Thank you for an excellent contribution to this discussion. Alas there are too few of us who enjoy joining the dots. BR.

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