Liberty Media has announced its intention to acquire the commercial rights to Formula 1, with Chase Carey being named as chairman, and Bernie Ecclestone staying on as CEO. Liberty Media has completed the acquisition of 18.7 percent of the business for $746 million, funded entirely in cash (this is actually a payment of $821 million because of a $75 million discount which will be repaid by Liberty Media to the selling stockholders on completion of the deal. With the sale price of $8 billion (less than CVC had wanted) this confirms that the business had an equity value of $4.39 billion, which in turn confirms that the Formula One group has debts of around $4.1 billion, which came largely from CVC Capital Partners borrowing money from banks, secured on the future revenues. There is also $700 million in cash held by Formula One. It seems that, unusually, the debt is portable, which means it can be taken on by the new owners. Of this, around $3 billion matures in 2021 and another $1 billion of more expensive debt matures in 2022. The business needs to be doing well by then if it is to support refinancing.
Liberty Media owns interests in a broad range of media, communications and entertainment businesses. Those interests are attributed to three tracking stock groups: the Liberty SiriusXM Group, the Liberty Braves Group, and the Liberty Media Group.
The intention is for Liberty to buy 100 percent of the shares, with cash and newly-issued shares in the Liberty Media Group and “a debt instrument” exchangeable into shares.
The acquisition is subject to the satisfaction of certain conditions and until these are satisfied CVC Funds will continue to be the controlling shareholder of Formula One. Once the deal is completed, Liberty Media will be renamed the Formula One Group. The consortium of sellers led by CVC will own approximately 65 percent of the Formula One Group’s equity (but not the voting shares) and will have board representation on Formula One.
Chase Carey has been appointed by Delta Topco and will serve as the new Chairman of Formula One, succeeding Peter Brabeck-Letmathe, who will remain on Formula One’s board as a non-executive director. Bernie Ecclestone will remain Formula One’s CEO.
“We are excited to become part of Formula One. We think our long-term perspective and expertise with media and sports assets will allow us to be good stewards of Formula One and benefit fans, teams and our shareholder,” said Greg Maffei, President and Chief Executive Officer of Liberty Media. “We look forward to working closely with Chase Carey and Bernie Ecclestone to support the next phase of growth for this hugely popular global sport.”
The sellers will receive a total of $1.1 billion in cash, 138 million newly issued shares in Liberty Media and a $351 million exchangeable debt instrument to be issued by Formula One, which will be exchangeable into shares, in a classic exchange of debt for equity. The teams will be given the opportunity to participate in the investment in Formula One, and the detailed terms of that investment will be agreed in due course. Certain teams have already expressed an interest in investing after completion of the acquisition.
The interest in Formula One already acquired by Liberty Media, and the remaining interest to be acquired upon the closing of the acquisition, along with $4.1 billion of existing Formula One debt and $700 million in Formula One cash, is being attributed to the Liberty Media.
Upon completion of the acquisition, the Liberty Media Group will be renamed the Formula One Group and will be listed on the NASDAQ under the ticker symbol FWON. Formula One will remain based in London.
The deal is dependent on clearances and approvals by antitrust and competition law authorities in various countries, approval by the Fédération Internationale de l’Automobile, the governing body of Formula One, and approval by Liberty Media’s stockholders. The deal is expected to close by the first quarter of 2017.