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.
joeblogsf1 
CVC retains 65 percent?.. Interesting…
That is not what it says
No, you mention CVC retains 65% of the equity. So basically CVC retains (about) 40% of the total concern, as Liberty Media is taking on the debt of 4.1 Billion. Am I reading you correct?
As I understand it, the debt will be turned into equity and so people will get bigger shares, but they won’t get cash.
CVC would own 35% of 65% or about 22%. They’ll be a minority shareholder, and the shares are public so post any no lock-ups they could sell freely.
I read it also as CVC retaining shares. Can you maybe elaborate on that? Is it an interim phase?
There are shares and there are shares. The key point is the voting shares. Beyond that it is just about making money.
Dieter Zetsche needs to up his mustache game.
How does the Sith Lord still get a position with the new owners? I remember Tony Blair being called the Teflon King as nothing stuck to him.
If Tony was The Teflon King then BE is the Teflon Over Lord of the Solar System akin to Ming The Merciless!! 👹
Because he still adds value to Formula One. You and I might not like the ticket prices, the countries it goes to, how the teams get their money allocated, but overall he’s still probably the best person at knocking heads together and getting things done in F1, at least in the short term when you’ve just bought the business.
Where Liberty can add value is largely in things that Bernie hasn’t done anyway, so he does what he does, they add what they’re going to do on top.
Presumably because nobody else knows what is going on?!
Now we should surely see an American driver.
And, I hope, a race in Southern California…
Why? If it doesn’t make economic sense for the old owners, i doubt it will make sense for the new ones.
I think you ask “why” about a new race…just a hope, brought forth by the assumption (perhaps vain) that the new bosses want to expand–or at least rationalize–the races. Might a different marketing approach facilitate American expansion? At least, after three years when BE’s gone…
We should have one in CA, one in NY and keep the race in TX; spread throughout the season. NY makes sense to go back to back with Canada. TX with Mexico.
what American driver? Rossi? it seems that his F1 career is pretty much over.
Lance Stoll. Good driver with plenty of money.
Stroll is Canadian.
The only way anyone in the U.S. Will host an F1 race is if they can make money at it. Promises of building the area into a higher class location falls on deaf ears, especially after spending $400M on the facility alone and $25 – $35M on each event. The new owners need a new business plan in order to attract more exposure in the U.S. Having said that, I think they will, we just have to see how long this will take.
interesting. Other than “Social Media” improvements not much will change. Social media not withstanding the new owners find away to change the economics so everyone benefits. This includes tracks and paying spectators.
[f1 boardroom day 1]
chase Carey: ok Bernie, how does this work?
Bernie: Honestly I have no clue anymore.
Finally we get a much more realistic view of F1 the company. With these new numbers it looks like F1 is actually worth about $4 billion. If 18.7% of F1 is sold for $746, that means 100% is $3,989,304, thats 4 billion in my book.
There is that 4 billion in debt that CVC raised against the value of F1, the way I read it, it looks like CVC didn’t pay any of the principal off. It might be that the way you transfer debt instruments from one company to another while not changing them is to keep the numbers as agreed to and not tell anyone how much you paid it off, this way no one knows how much CVC put into their pockets. I think this item is the best insight we will get regarding just how much CVC wanted to sell, they never maxed out their use of debt to engorge themselves, they eventually had to sell it. I wonder if Liberty will be using debt as a tax liability.
There is going to be an FWON meeting in New York City on November 10th, how do we get an invite? When Chase Carey (the new CEO of F1) spoke in the investors phone call he was extremely nervous and referred to Bernie Ecclestone as Bernie Ecclestein, funny stuff.
The good news is Bernie is staying on. Not that I expected him to leave. He knows all the side deals he has made over the years and will continue to amuse and aggravate us for decades to come.
I think at 85, it is unwise to talk about about decades to come
I think at 85 it might be surprising if he is still there next year once the new management gets up to speed.
If anybody can beat the Grim Reaper, it’s Bernie. But maybe a decade more, judging by various USA Supreme Court justices and senators who are still working in their 90s.
He’ll bribe the Grim Reaper to let him stay longer. Oops, I meant pay off. No, that’s not right either. Contribute to a charitable organization, that’s it! Isn’t that how the Bavarian court system worded it?
Hopefully, this deal will bring about growth for the sport as well as a better online presence. Could this deal signal a slow shift away from races on free to air TV toward pay per view?
What is a debt instrument? Are these new folks going to invest in the sport? It could be as big as the Olympics but will it be? Are they going to honour the sports history? Is the Bernard staying on to beat new commercial agreements out of the teams for 2020 and if so doesn’t this set a precedent that the new incumbent will want to stick to? Wouldn’t it be better for the commercial arrangements to be transparent and fair? Wouldn’t it be better to impose a budget cap which would ultimately lead to teams being highly profitable? I know you’ll be asking the hard questions Joe and I look forward to reading the answers.
It is a debt structure
Some money is going to be paid to some businessmen by another group of businessmen so a group of completely separate businessmen can make some money for themselves.
Teams having the option to buy in – my initial thought is great, but I would worry only a small number of the big teams could afford this, so it expands their influence and undermines the smaller teams even more. Hopefully there is cap on any one teams investment (including Ferrari!) and the wee teams can secure finance given its possibly a once in a lifetime opportunity. I hope the new owners look at how we can have a full and competitive grid going forward as one of the key priorities
What is Liberty Media’s future policy on the current f1 paywall? Is it likely to continue? And would current deals remain in place! Excellent scoop, btw!!
Am I getting it right that at the moment CVC is the only seller (more than half of their shares)?
No, they all have to sell, or take shares for their shares.
So we’ll be in the slightly odd position whereby VirginMedia ( a Malone business ) will be paying Sky to show F1.
I wonder if it will lead to the middle man being cut out…
Wonder how the ‘teams can buy shares’ concept works. If for eg Ferrari buy a large stake (from what is available) would they be able to control F1?
Formula One Group = FOG
No change there then?
Actually it is a very big change as all kinds of things must become transparent
Like the Concorde Agreement?
There is the potential for great things to come from this. Here’s hoping and to keeping an open mind..
I wonder what historic value means when the grandstands are empty in Spa, Monza and Silverstone. Maybe we should start thinking about how F1 cars would look on ovals…..
But they are not
As Joe mentions below Michiel, the grandstands at Silverstone were sold out, the grandstands at Spa had their best attendance in years, Hockenheim got at least towards a somewhat decent number etc.
I can imagine that when Vandoorne gets going we can have both Dutch AND Belgian fans buying up enough Spa tickets to rebuild some of the lesser used grandstands.
And it could well mean some of them flock out to races like Hockenheim in the near future too, or go for a sring trip to Spain, choose Hungary as their holiday event etc. And if we get Ocon racing in a good car and Grosjean hold on, I don’t see why the French won’t be more interested for Spa, Hockenheim, Monza, Monaco (or is that a sellout already?) and Spain too.
And who knows, maybe Wehrlein will allso get Germans enthusiastic again, boosting crowds at the German GP, and possibly Austria and Hungary.
There really is not much less the new owners can do, once they decide to do any promotion at all.
Joe, what do you think of the Force India rumours?
Just the latest in a long sequence. Force India is worth next to nothing, so taking it over is possible. However the mo ey to run it is another question.
This will be fun: when completed it’s a public company, quarterly conference calls and 10-Qs and 10-Ks. I can’t wait! Going to be more fun analyzing the business than watching (some of) the races.
As long as they don’t start messing around with race formats or other gimmicks like that I’m onboard
$75 million commission? Good work if you can get it Makes my £100 @ 5000-1 on Leicester City look a bit tame…..
It all sounds a bit odd. A reverse takeover. An $8Bn or $9Bn per year T/O wide ranging group renaming as a $1.8Bn a year group in just one sport. There must be a lot more to come, the rest of Liberty must be split off as a new group. It makes no sense to have formula one group owning a baseball team and being based in London.
So is Delta Topco continuing? with Formula One Group above it and Formula one Management below it?
However will it get sufficiently transparent to list on the NASDAQ ?
I had a quick look to see if the new share issue had hit the Liberty stock price, but found there are 26 Liberty listings on the NASDAQ and three on the NYSE.
Though only three of Liberty Media Corp itself, A, B and C. The number of shares issued in each varies, being A=25.57m B=9.87m and C=55.69m. So 138m new shares are likely to be form a new class D share as it would dilute any of the existing types to an unacceptable level.
(Data from Digital Look.com)
The buyer is Liberty Media Group, not Liberty Media Corp. LMG is one of 3 subsids of LMC. Another subsid (Liberty Braves Group) owns the baseball team.
the buyer is Liberty Media Corp…after completion of the deal Liberty Media will own 100% of F1 and they will “attribute” it to a new tracking stock called Formula One Group (FWON).(I think LiveNation , a major live event co.) will be a part of it) CVC gets 65% of FWON and majority of the board but only one seat at Liberty Media.The shares the teams could buy would be of the FOG. A very complex transaction befitting Formula One and a very good deal for Liberty Media especially for tax reasons. CVC and partners , sell but don’t really sell…take some profits and stay involved in what hopefully will be an expanded business model.I foresee a F1 call-in radio show on SiriusXM, a weekly show on Discovery I think it’s Bernie at his best and leaving Formula One in good shape.
What baffles me is why Liberty has decided to keep Bernie on, considering he is really a dinosaur (in oh so many senses) who has been against all things new media, has screwed circuits into the ground with fees, taken F1 to some questionable destinations, holds teams and fans in utter contempt, and brings the sport and us the fans into disrepute every time he opens his mouth… I mean really Joe, isn’t it high time this person who let the wolves in to ravage the sport we all love was out on his behind? Surely he isn’t THAT indispensable…? Charles de Gaulle comes to mind…
Because they need to negotiate a new Concorde Agreement and he’s the best man to do that
I think that one huge part there Ale, is as Joe mentions, they have to get the negotiations for the new deal with the teams going quite soon.
Bernie is a great negotiator, and he knows all the ins and outs.
And even if they would not want him to head off the negotiation, better to have him inside their group than on the outside where he might be a huge risk to them instead.
Will this effect the deal with Sky?
The bulldust starts.. Already seen on a report in Aussie media that this means there will be 25 races. I hope you have a clone…
There is provision in certain agreements for 25 races, but it will cost more money and the teams will demand a lot more.
Liberty paid 16.8x EV/EBITDA for FOM, while their existing assets are selling in the public market for 14.8x (EV/EBITDA).
Liberty’s EBITDA growing at 15% CAGR since 2013, whereas FOM’s EBITDA has not grown at all since 2013, i.e. 0% growth
It will be quite interesting to watch LMCK open this morning
These are finance people not so much media people, they see F1 as an undervalued asset. I’m guessing they see how they can get that growth going in the right direction. As you probably know, buy undervalued assets, make more valuable then sell. I think LM will eventually sell F1 once they make it all pretty. I give it 10 years.
17x EBITDA for assets with 0% growth (trailing 5 years) is hardly undervalued. Yea, I know, grow revenues through “social media” and “digital platforms”. We’ll see. The revenue streams are contracted for many years, something which they trumpet in the investor deck. Can’t have it both ways, if the revenue streams are contracted then it’s difficult to grow significantly, e.g. long term TV rights make it difficult to grow the content distribution revenue
Does this Liberty deal *really*make one iota of difference in how F1 will be run Joe ?
Aren’t they just here to make money as where and still are CVC ..
We will have to wait and see
A few years ago my young son was talking to me about F1 and we got onto Bernie. I described him as a man who can sell the same company several times and still not lose control of it….
All the best to those who are attempting to play ‘Spot the Difference’. About the only change I can see coming will be the disappearance, at least on screen, of Vladimir Putin at the Russian GP. I imagine US audiances won’t be too happy to see him receiving the red carpet treatment, especially if the loony Trump is sitting in the White House bomb shelter.
Those who were dreaming of seeing the last of Bernie may have a bit of light at the end of the tunnel, if the US public are not happy to see him continue as CE. His cowtowing to governments with unsavory reputations and the German £100m bribery payoff might be too much for a media company who’s popularity is important.
A couple of questions
1. How does the franchise idea for smaller teams value uplift fit in the scheme /
2. Who bears the financial risk of any EU fines which can be substantial ?
Surely there’ll have to be a special fund set aside, let’s say around $100m or so, to pay for the ongoing counselling, rehabilitation & psychiatric care that will be required by the army of due diligence lawyers who must currently be left suffering from the legal professions equivalent of post traumatic stress disorder having spent months trying to wrestle a straight answer, to even the most basic question, out of the beloved Messrs E & C
All joking aside, I’m glad that FOM will eventually become a publicly traded business as this should (hopefully) increase the level of openness / scrutiny surrounding the sport.
The debt is non recourse same approach as for a PFI contract – the debt stays with the project company if the shares in that company are transferred.
The wording in the presentation which explains why Bernie is so interested in exotic countries rather than deals in europe. The debt is cheaper if backed by a government covenant – so a pledge of £150m in future revenues from a government in Abu Dhabi is worth more to him than a pledge £250m from a struggling circuit owner in the midlands with no covenant.
Interesting that we have already had more transparency in the last 24 hours about the F1 business model than in the whole of the last 20+ years!!
“struggling circuit owner in the midlands with no covenant.” Also with no Patrick Allen.
I’m odd but I used to like Crane the series.
And the rich get richer….
Why is it that John Malone’s name is not mentioned in any of the recent reporting on this? Including this article?
surely he’s the mover and shaker in this deal.
Do the Liberty Group own Virgin Media? Because if they do, and if their customer performance is anything to go by, then abandon hope now.
Liberty Media and Liberty Group is not the same thing
This is all a little bit confusing, but I think this makes sense. If I understand correctly, the FIA will still have their 1% share, but it will be 1% of Liberty Media, aka the Formula One Group, correct?
Overall, is there any reason to get excited about this? Is this good for the sport? Good for U.S. fans? Good for anybody? Too soon to tell?
We need to look at the details a bit more
Now that I have seen a photo of Chase Carey, I am convinced he is Jon Stewart with a Moustache.
Also, the Great Moustache of Stuttgart (Dr. Z) has been pretty successful, so my guess is that F1 is going to get better now, based purely on facial hair.
Joe:
Is there anything that you are aware of that sheds some light on the direction that Liberty want to take the sport on?
Are they likely to move the sport forward or is it a case of “meet the new boss” and all they want to do it keep slowly killing the golden goose?
They want to make money, but perhaps they will do it in a more creative and positive way than CVC
I hope that to be the case. Nothing wrong with anyone making an investment of such magnitude wanting a healthy return on their money, but at the moment I’ve read nothing that clarifies if they want to do it the CVC way (taking and not giving anything back to the sport) or if they will be looking to re-investing more of the proceeds back into the sport and actually promoting ir throughout the world.
Clearly there is a huge untapped potential in the internet and mobile technologies for expanding the reach of the sport but it requires work…something that FOM and the FIA seem to be unwilling or unable to do even though it could increase revenues substantially.
According to the BeeB Bernie has indicated that the only reason the new owners got into F1 is to make money. Not so fast Bernie, it would appear that thanks to your involvement in F1 you have become a billionaire. The only person who has not exploited F1 for personal gains is Max. So Bernie in Jamaica they would say Gimmi mi a break mon.
Let’s take a look at a few of the ways the new deal will benefit F1. In Canada F1 is shown on TSN. TSN is owned by Bell Media, Rogers Communications and a small piece by ESPN. Canadians who pay for Bell’s Services such as Satellites; Internet Cable etc etc,. must pay for TSN. The same goes for subscribers to Rogers. In the USA Americans who subscribe to the new owners for comparable services etc. etc will be compelled to pay for F1. The sport will now have a new and diverse viewership. Viewers in the expanded market will become hooked on F1. The rest is elementary….
Do you think their first priorities will be to
1 sort out the eu investigation.
2 sort out a new long term deal with the teams
3 then when they have stability move F1 forward.
The EU investigation is still not defined and will be solved as necessary. A new long-term deal with the teams is required by 2020.
Undoubtedly Bernie has been Mr. F1. He is responsible for turning F1 into the $billion company that it has become. But no one is indispensable. So the new owners are better off giving Bernie a golden handshake now rather than in one – three years.
There will always be a learning curve whether it takes place now or in three years. The new owners should very quickly constrain Bernie’s ability to make any contracts or extend any contracts without their consent.
This should be done quickly especially with regards to Ferrari wherein Ferrari gets Free advertisements, free millions for doing nothing and an outrageous veto. Ferrari will never leave F1 regardless of how loud are the noises that they make. So should Bernie extend the contract with Ferrari then Marchionne will under no allow the new owners to break the contract (more on this later.
Joe thanks for putting some explaination up for us about this very complicated deal its great to get these details .
I hope it turns out to be good for the sport but my worry is that it’s just another investor and this time at even higher numbers meaning more of the same – screwing every last penny out of everyone along the way.
The statement from CVC when they originally invested in F1 makes for
amusing reading. http://www.cvc.com/media-centre.htmx?mediaitem=2611003123701&tabyear=2005
A respected F1 site is reporting that the new owners will allow the teams to buy F1 shares after the takeover is finalized. This may not be a good idea since the teams are renowned for their myopic views on just about everything. Interestingly, Ferrari is silent on the matter.
Could it be that Ferrari recognize that allowing teams to buy shares in F1 is a prescription for disaster? Moreover Ferrari consider themselves the crème de la crème of the teams in F1; So Ferrari will never stoop so low as engaging in any activities that would portray Ferrari as being in the same class as the other teams
(A personal note: My apologies to our inherent grammarians. The syntaxes in the piece posted earlier could not have been more poorly constructed. These stemmed from migraine and double vision issues. In any case it should not have being posted until those issues were resolved)
Bernie wants 6 U.S. F1 Races. Hear him say it at the 39:30 mark during this interview with Sir Martin Sorrell