The future of the Force India F1 team remains somewhat clouded with Vijay Mallya in huge conflict with the team’s primary sponsor Diageo (the owner of Smirnoff) and the team’s other partner, Roy Subrata (of Sahara), having said he is keen to sell his shareholding, in order to raise money to get himself out of jail in India.
Diageo is already looking at ways to take the F1 team off Mallya’s hands because of loans to the team that they guaranteed, that have not been repaid, but the Mallya empire is a mess with conflicting legal claims over many of its assets that mean that Diageo cannot easily take control of the shares it wants. Mallya is now saying that he is willing to step down as chairman of United Spirits Ltd, if there is a decent deal for him. Diageo may not like the idea, but it might be easier to pay Mallya to get rid of him, rather than trying to wade through endless legal actions to get him out. The faster the company returns to a stable state, the easier it will be to drive up sales and profits. If Mallya does sell out then another part of his family’s empire will have disappeared, but he is looking for money to pay his debts related to Kingfisher Airlines and probably has a rather high figure in mind for a settlement.
In its recent half-year earnings report, Diageo said it has deposited $139 million in an escrow account as part of an agreement to guarantee the liabilities of Watson, a company affiliated with Mallya, which owns his stake in the F1 team. Diageo says it is seeking repayment of that money from Mallya. There has been much talk in the course of the last six months of Diageo taking control of the F1 team (a valuable asset at the right moment) and then working in partnership with Aston Martin to rebrand the operation for their mutual benefit, with Aston Martin aiming to sell more cars and Diageo selling more vodka. Marketing men have pointed out that the connection is potentially very strong, as both Aston Martin and Smirnoff are linked with the James Bond character, a sexy brand that could attract money from other companies. Aston Martin, remember, is five percent owned by Mercedes Benz, Force India’s F1 engine supplier and the source of some of its road car engines in the future. Getting Aston Martin in F1 would be another coup for the sport and very much in line with Ferrari’s Sergio Marchionne says he wants to see more manufacturers in the sport, as the battle lines are drawn for commercial negotiations for 2021 and beyond. Ferrari and Mercedes are already strongly aligned in F1 with Renault and Honda also seeing the logic of their arguments. No doubt there are also plenty of phone calls going with Wolfsburg, the headquarters of the VW Group, which owns a string of brands including Porsche, Audi, Lamborghini and Bugatti.