There was a generally negative reportage of the news that Marussia has acquired the shares in the Formula 1 team that were previously owned by Lloyds Development Capital (LDC). I am not sure that I understand why.
LDC is a private equity company and a subsidiary of Lloyds Banking Group. Its involvement in the F1 project was entirely financial and the goal was to make money. From what I hear the firm did exactly that. Perhaps it was not a huge amount, but I am reliably informed that they did not “take a bath” on the investment.
From the start LDC held the majority of the shares in the team, known in those days, as Virgin Racing. It is believed that it invested only $15 million. It left the running of the operation to John Booth and Graeme Lowdon of Manor Motorsport. The aim was to use the commercial firepower of the Virgin brand to excite interest in the new business and this resulted in Marussia becoming first a sponsor and then an owner of the team. LDC says that at the end of 2010 it sold some of its shares and achieved “an attractive return on its initial investment, together with the retention of a shareholding in the team”, which could be sold at a later date. That transaction gave Marussia control of the business, although the management remained more or less as before, while LDC reduced its shareholding to just over 25 percent. LDC did loan Marussia Virgin Racing some money as well, but this debt is in the process of being repaid.
The point that has been missed by the people analysing the story is that while the team may have booked some losses in the course of the formative stages, the negative value belongs to that entity, not to the shareholder and so if a buyer is willing to take on the debts, a shareholder can depart with a profit on its shares. LDC has thus parted with its remaining 25.3 percent, all of which is pure profit, assuming that the loans it made are paid.
So LDC is happy and Marussia now has full control of the business. The major conclusion can draw from this is that Marussia owner and financier Andrej Chegalov has faith that the team is worth investing in further. And that is not a negative message. Cheglakov is a scientist who has made fortunes by introducing new technologies into the Russian markets. He is involved in many different businesses, including the secure printing of Russian bank notes. He has just been named as a senior vice-president of Rostelecom, the market leader in broadband and pay-TV in Russia. It is fast expanding its mobile data networks, while retaining its fixed line services. It is also an innovator in cloud computing and e-government services.
Marussia Motors, itself, has been quiet for a while. The primary problem seems to be the supply of engines which was going to be done by Cosworth. The company now seems to be looking at ways to have Russian-made motors, while in the meantime is keeping in the public eye with a rumoured deal to build presidential limousines for Vladimir Putin. The F1 team continues to build the Marussia brand, even if there are no products available at the moment.