The details of the Liberty Media takeover of Formula One are now beginning to emerge and it is interesting to see how the ownership structure will be when the second part of the transaction is completed before the end of June 2017. The completion date will depend on various clearances being given by shareholders, the FIA and by the competition authorities. The parties involved are confident that this will all be possible in the time available. When the deals are completed Liberty Media Group will own 35.3 percent of the shares in the Formula One Group. Of these, John Malone (and other Malone entities) will control 3.1 percent and Greg Maffei, the CEO of Liberty, will own one percent. CVC will still be involved but its 38.1 percent will be reduced to 24.7 percent, while Waddell & Reed’s 20.5 percent will drop to 13.3 percent. The Lehmann Brothers shares (held by an entity called LBI) will reduce from 12.1 percent to 7.8 percent. The Ecclestone Family’s Bambino Holdings will reduce from 8.4 percent to 5.4 percent. The Norwegian investment fund Norges will reduce from 4.1 percent to 2.7, while Bernie Ecclestone’s share will drop from 3.3 percent to 2.1 percent and the management will reduce from 2.8 percent to 1.8 percent. Other shareholders, such as directors, the FIA, Ferrari and so on will reduce from 10.6 percent to 6.9 percent. This will mean that overall 64.7 percent of the shares will still be in the hands of the current shareholders. There will be lock-up agreements to restrict the selling the shares, but these are usually only around six months in duration. This is designed to ensure that the share price is not too volatile in the first month of trading. There will be certain veto rights with regard to the termination of the chairman and CEO for 30 months after the second deal is completed. Hence Bernie Ecclestone saying that he will still be in charge in three years from now. For the first 30 months the board of the Formula One group (the renamed Liberty Media) will feature three directors nominated by Liberty Media, three nominated by the previous shareholders, three nominated by the F1 teams and three representing the executive management, plus the chairman and two independent directors.
The purchase is a complicated business with news Liberty Media shares worth $2.9 billion being issued, plus cash of $1.1 billion. Thus the equity value of the transaction is just over $4 billion. However, the business has $4.1 billion in debts, which mean that the enterprise value of the Formula One group is around $8 billion, because the debt is included in the calculations and will be taken on by the buyer. The documents reveal that the revenues in F1 in 2015 were $1.697 billion, of this the Formula One group retained just over $450 million after costs and team payments. The team payments were just under $900 million. The revenue streams were race fees (around 30-35 percent), broadcasting fees (30-35 percent), advertising and sponsorship (around 15 percent) and other revenues, such the Paddock Club, freight, TV production, feeder series, licensing and so on were about 20 percent. Formula One says that it is a strong business because it has multiple revenue streams, involving high qualify partners and governments, staggered renewals of long-term deals which keen the business stable and around $9.3 billion in contracted revenues between now and 2026. Liberty believes that it can increase the revenues by better promotion and marketing of F1 as a brand, by the enhancement of content distribution, especially in digital terms, by establishing a broader range of commercial partners, through sponsorship, by evolving the calendar (which could in theory mean an attempt to have more races, but perhaps simply getting better venues) and leveraging Liberty’s experience with live events and digital monetisation.
With Formula One being listed on the NASDAQ once the deals are completed it will mean that there will be much more transparency, which will help to make the business a lot more understandable.