Bernie calls a meeting

Bernie Ecclestone is the master political player in Formula 1 – and he has been for the last 40 years, although Max Mosley and Luca di Montezemolo have both had their moments as well. As the end of the current Concorde Agreement approaches in December 2012, the search for a new solution is just beginning to ramp up now.

The problem is that in order to cash in again, CVC Capital Partners (which owns the Formula One group of companies) needs a stable structure inside the sport if it is to find a suitable buyer for the business. No-one in F1 really cares whether CVC stays or goes and there is a certain amount of resistance to the idea that the men in suits will get yet another pay-off before they depart. The sport thinks that the financiers have had enough money out of the business – and have given nothing back, which seems a fair assessment. They have used the sport as a cash cow – and they have milked it. In order to sell the business in these circumstances there needs to be a better deal for all concerned (which cuts the value of the business as a whole) or the teams need to be bullied into line. The teams have started working together more and more, in order to avoid being divided and conquered. The logical step forward from that position, is for them to find the money to buy out CVC, at a sensible price. That would require risk and so some teams are averse to that, but that would give them the control over the commercial rights that they think they ought to have. At the same time the FIA might also go down the same path as letting the rights go meant that the federation did not make the most of them. A drop in the perceived value of the sport is no bad thing at the moment for all concerned as it makes it easier for all those looking to find the money.

The background is thus rather complex but, so too, are the possible developments.

Bernie was forced to accept certain terms during the last round of negotiation in 2009 which means that he is restricted in what he can do in the immediate future. This is not public information but we believe, for example, that Ecclestone can make no offers to any teams before the end of December 2011, unless the same terms apply to all the teams. The best that Ecclestone can do until the end of the year is thus to keep people guessing what he is up to.

It is interesting therefore that he recently called a meeting of a number of the F1 teams – but not all of them – and told them that a new Concorde Agreement is needed, despite the fact that for the last few months he has been saying that the sport can survive without one. We believe that the Formula One Teams’ Association has since told Mr E that the organisation would welcome a proposal for an agreement, on the basis that everyone gets the same deal.

There is an element of risk in all if this for Mr E because his position relies (on paper) on CVC vesting all of its power as a shareholder in him, on the basis that he is best-suited to find a solution. If the finance folk decide that someone else might do the job better, they might try to change the current structure (although there may be articles of association and shareholder agreements that stop that happening).

The man that might be called upon is Formula One group non-executive director Sir Martin Sorrell, who is a very savvy operator in the world of media, although his way of doing business and the way Ecclestone runs the empire would be very different. And, reputedly, the two do not get on…

17 thoughts on “Bernie calls a meeting

  1. “This is not public information but we believe, for example, that Ecclestone can make no offers to any teams before the end of December 2011, unless the same terms apply to all the teams.”

    That’s clause 4.6, which was introduced to stop ‘extra payments’ to Ferrari, but has been used by ‘certain’ teams to stop a ‘goodwill’ payment to HRT … Ferrari still get a bung however from their special ‘column’ status.

  2. Joe, any chance the various circuit owners might be part of a deal involving a potential buyout of the boys & girls of CVC? Or is simply a case that no-one [neither Bernie, the teams nor the FIA] really cares about them aside from holding their race? Thanks & good article reading again.

    1. Brawley,

      I doubt it. Circuit owners have generally failed to have the gumption to play on the world stage. Mainly because the key is Monaco and that has been run by the same person for about 40 years and there does not seem to be much ambition there.

  3. So everyone will go through the motions of pretending a new deal is being negotiated for the next few months, early next year Ferrari will accept a ‘special’ deal on better terms than anyone else will be offered and history will repeat itself.

    If Bernie gets really lucky it will also trigger sufficient disagreement among the teams that FOTA falls apart (until that piece of history inevitably also repeats sometime in the future) and hes back with all the power again.

    Would anyone bet against it?

  4. I see another issue. When people agree to renegotiate, or give “first options” to renew, they do that with the good faith as entered into. But it creates the most fun of effective contracts, a written term which by definition continually redefines itself. Please define goodwill, in this context. I get these in many advertising contracts. Hey, i am a broker. If i get a publisher selling pages through me, what incentive is there for them to say “thanks mate for the ads, we’re dealing direct now”? Cutting me out. So i am very familiar with this kind of thing. My answer is: not worth the paper it’s written on. And i think this applies to larger deals as well, annoyance being you can afford more litigation then . . .well really you cannot, because if you’ve just lost a huge amount, bet you’re in debt and counsel will have slight issues with that. As in, they want paying also, first. But people do chase rainbows, and occasionally pull that off technically.

    I fix my own worries by very different means. Largely, if you get jerked around, you will always get jerked around. So end the pain already! I reckon F1 is in the “tired of being jerked around” phase of separation.

    Now, if Bernie strikes out with some really interesting deals like with Arthur Imperatore, but he’d need a few others, we may have a different kettle of fish.

    Two of my favourite quotes, from people i know of knew, one from a solicitor who stiffed me big time (still dealing with this, 7 years later, it was particularly nasty) and the other from a very prominent member of the Bar, your guess: “If no-one lied, there would be no trials”; “there is no law, when you look at it”. My guess is that reality is the leveller.

    right, i am late, all best to all – j

  5. Joe,

    Would someone like Sir Martin Sorrell, be a better fit for the teams? Whist they know Bernie very well. They must be fed up with being bullied into deals. He seems to treat every deal as a battle to be won.

  6. From two of the comments above it appears that Joe and Karen have access to the contents of the Concorde agreement, or at least parts of it. How?

    The thought that Bernie might be replaced as the chief F1 instrument by CVC is not as far fetched as it used to be. A recent “Exchange of views” on the JamesallenonF1 blog led to the disclosure that Bernie’s previous “My vote and Bambino’s vote together, outvote all and any, other votes or combination of votes” type clause, was excluded from the CVC F1 deal and further, the CVC directors have now become “iDirectors” with superpowers to outvote everybody en-mass including Bernie.

    However if Bernie were to go, would his organisation go with him? Would whoever took over have to start from scratch?

    1. rpaco,

      How could I possibly have access to the Concorde Agreement? I am not a signatory and I don’t work for Bernie. Everyone is terrified to show you such things.
      I cannot speak for Karen.
      In any case, Clause 14 is well-known as being about confidentiality…

  7. Joe:

    would it not be in the best interest of the teams not to negotiate at all and let the agreement expire. At that point they would have better leverage to negotiate a better deal or a much better price for the commercial rights all together? without the teams signed up and committed FOM/CVC really don’t have much.

    One would imagine that by now the teams are well aware of Bernie’s divide and conquer M.O. and as Ferrari seem to have the intention of trying to acquire the commercial rights, it would not be in their best interest to play Bernie’s game this time around. Hopefully FOTA will tough it out and at the very least get a better bargain.

    I would so like to be a fly on the wall at those negotiations.

  8. Darren,

    if you skip back to my last say 5 comments, you might infer exactly why Sorrel is the last person to rock any boat or do any good for F1. I only just slagged off his entire economy, with all but name mentions . . . and bear in mind that is not quite pissing on my own doorstep, but very close. Has to be said. Sorrel came in as a putative nice guy when F1 was trying to be corporate, without understanding that word. At all. If he runs it, i think we should get into downhill go carts. – j

  9. Hey Joe,
    Just have to ask, because i’ve seen this interaction going on for some time now… who is Karen, and does she really have a connection with Princes Gate??

  10. There has been a lot of talk about the buy out of CVC. However, my question is how are the teams, circuit owners, or whomever going to get the money? The markets are not what they were in the heydays of the pre-GFC world. Circuit owners in my experience live hand to mouth and therefore don’t have billions available to buy a sport that would only visit their venue once a year. Most circuits (especially street venues) are government owned/sponsored and governments aren’t flush with cash these days. Half the paddock have no money at the moment as sponsorship is thin on the ground. That only leaves the super-rich who don’t report to anyone.

    I think the real question is when Petra will be taking over the family business!

  11. I find it astonishing that one of the worlds most popular and wealthy sports is run in such a ridiculous way, particularly as some truly massive global companies are involved.

  12. @rpaco
    Funnily enough, Karen has brought out the “Clause 4.6” line on here before (see Joe’s News Corp/Exor blog post on May 3rd), and Joe had the exact same “but Clause 14..” response.

    Pitpass has mentioned Clause 4.5 (a) & (b) before too – http://www.pitpass.com/43477-The-truth-about-EXOR-News-Corp-and-the-Concorde-Agreement

    So various claimed Concorde Clauses do float around the web. Nothing new really.

    In fact, the 1997 Concorde Agreement is easily available for PDF download on the web too. I’m sure a large portion of that has remained the same over various updated iterations in the past decade and a bit..

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s