As we know clickbait is all the rage these days, with a screaming headline backed up with whatever drivel the person writing has managed to shovel together into some kind of a story. A very good example of this was an article over the weekend in which Bernie Ecclestone said he did not know whether Liberty Media has the funding with which to complete its purchase of the Formula One group of companies.
“I can’t say no and I can’t say yes. I’ve never counted their money,” Bernie said. ” I don’t know their company, so I have no idea.”
On the face of it, there is no obvious story here. Ecclestone is the CEO of the group being sold but is only a very minor shareholder, although an Ecclestone Family trust company, over which he is not allowed to have any control, owns a few more shares. The controlling shareholder – CVC Capital Partners – clearly believes that the buyer has the money required, otherwise the transaction would not have gone ahead.
However, this comment was then turned into a question about Liberty’s ability to pay. Perhaps that was what Ecclestone wanted. Perhaps not. Whatever the case, he can always blame the press for the resulting story. Perhaps it would have been wise for the writer to ask Liberty, in order to get a balanced story. In fact, that was not really necessary because Greg Maffei, the CEO of Liberty Media, answered the question a couple of weeks ago when the subject came up, when he was discussing the F1 teams buying shares in the business. Maffei explained that some of the teams had agreed deals with CVC to buy stock at $21. The shares are now trading at $30.67.
“To be clear, we’re not in any way dependent upon selling equity to the teams,” he said. “The teams have expressed desire to be equity investors, and we think that’s interesting, but they will be buying stock that’s secondary stock of CVC, its in no way primary stock. Our financing is not contingent upon it. We agreed to pay $1.1 billion of cash, we’ve already paid $800m-ish of that. And with another $300m to go. We’re fully financed for that incremental $300m, and we will issue the stock – $3.3 billion at the $21 price – which will now clear up to about $4 billion to CVC and its fellow shareholders at the second close.”
So cash is not the issue. CVC is accepting Liberty shares in payment and will then do with these shares as they wish. If they are put on sale (when all the various lock-up periods are finished), will people be willing to buy them? Firstly, it does not really matter because the sale will have been completed and thus CVC will take any loss that results. Secondly, Liberty has a terrific record in these kind of transactions and has made a lot of people a lot of money. And thirdly, a little negative talk about the sport is not going to make much difference when the investors and analysts look at the potential that is there to be developed in the Formula One group.
Liberty Media continues to quietly push ahead with its work to get the clearances required from the different parties who must agree to the deal. The key one remains the FIA, as most of the others will be dependent on the structure that Liberty and the FIA come up with after their discussions. This will need to be acceptable to the competition authorities – and everyone involved knows this.
So, will it all go ahead? There is no reason to suggest there are any real problems ahead.