There is action in the world of the ownership of the Formula One group – but one needs to be very careful at taking things at face value, because these kind of people never go public until a deal is done, unless they want the publicity to achieve something. Normal people go to the media to get the truth out, but financiers do not. They go to the media when they want messages delivered or when they are in negotiations. Often, I have found that it is best to believe absolutely the opposite of what they tell us, because more often than not this is what happens. So, CVC apparently does not want to sell (which means that they do). The price is £5.5 billion (which means that the price is a lot less but there is another bidder). Money is always an issue in these matters. CVC Capital Partners has made a vast amount of money out of the sport, about five times the investment made, but they have done so at a cost. The company is now in the public eye and is seen as being grasping and completely uncaring about the sport. They are seen within the sport as being asset-strippers and have done F1 long-term damage in exchange for short-term gain, notably with the squeezing of revenues from racing circuits and the switch to pay-per-view TV. They have failed to invest in social media and the overall audience (F1’s biggest asset) is weakening as a result. The idea of selling is not perhaps any great surprise. There is action looming from the European Commission that may or not happen; Bernie Ecclestone is 85 in a few months from now and he is still trailing legal troubles behind him. The attitudes towards sports are changing following the FIFA Scandal and CVC boss Donald Mackenzie is coming up for retirement. He has been the motive force in the F1 investment and perhaps some of the other “partners” are less keen. But being private equity people they want to squeeze every penny before they depart.
I had an inkling that this was coming when I spoke to a top F1 figure (who should best remain nameless) and he said that “something will happen” when we were discussing the ownership of the Formula One group. This set off all the alarms in my head because people don’t say things like that. “Something will happen” means “something is happening”. Thus it was no surprise to see a story pop up in the Financial Times yesterday, suggesting that there is buyer out there and naming a consortium involving 75-year-old Stephen M Ross, a real estate magnate, who has made squillions developing chunks of New York City, notably the Time Warner Centre and the Hudson Yards, that used to be a stretch of industrial wasteland along the Hudson River. One of Ross’s companies is RSE Ventures, an investment firm which has in the past funded such things as FanVision, the handheld in-venue content device that was used in F1 about 10 years ago under the name Kangaroo TV. The company invests in sports-related business. The motor for the company is CEO Mark Higgins, a former press secretary to Mayor Rudi Giuliani, who later became a major player in the Lower Manhattan Development Corporation, which has rebuilt the World Trade Centre site. He went on to become the business director of the New York Jets football team, including being involved in the construction of the MetLife Stadium. He is now involved in the running of the Miami Dolphins, which Ross owns. RSE has also launched International Champions Cup in 2013, an attempt to create a club World Cup competition. The soccer connection probably explains the involvement in the bid of Qatar, which is rolling in money and keen to invest in sports in order to improve its global image. The goal is to make Qatar into being seen as the centre of global cosmopolitan sport. The recent FIFA scandal has not helped. Qatar is probably rather worried that FIFA Scandal might lead to the World Cup being taken away and so could be trying increase its sporting credentials in other areas. Money talks, of course, and so the idea of Qatar in league with American investors should not really be a surprise, although the government in Doha has been upsetting its neighbours in the Gulf, notably as a result of funding the Muslim Brotherhood and Hamas. Various Gulf states withdrew their ambassadors last year because they felt that Qatar was interfering in their internal affairs.
Strange bedfellows. The question is who is the locomotive?
Private equity people offer little hope for changes to the existing financial structures, simply more of the same and probably an expansion into new areas where money can be made. There are plenty of them because there is plenty of revenue that has been left on the table. A buyer such as John Malone, the cable magnate, had a reason to buy other than screwing profit for the business. His aim was to use the sport as content and generate revenues by providing it to his clients. That does not mean that he would not make money from the sport but it would be in his interest to have the sport performing well and focussed on the positive.
Will Ecclestone still be able to hold on to his role? CVC has been unbelievably loyal to him and given that altruism is not their thing, one has to ask why this was the case? Probably they were terrified to try and run the business without him… Who knows? What else could it be? When it comes to a new buyer, however, it is hard to imagine anyone would want to keep an 85-year-old in charge, particularly one with legal problems following him around. On top of that F1’s political crisis was ultimately his doing and thus far he has failed to fix it.
Bernie’s primary motivation in all of this must be to try to stay in charge. He’s not a quitter and the fact that he says he will sell his shares if the deal goes through, will be designed to worry any newcomer… in other words he would prefer a different deal and there is probably someone else in the market.