Feeds:
Posts
Comments

The FIA, the governing body of the Formula One World Championship, says that it has not been a party to the negotiations surrounding the sale of the Formula One group to Liberty Media and says that it is awaiting “further information regarding the proposed terms of the transaction and welcomes the opportunity to discuss with all parties the possible consequences of this agreement”.

“While it remains to be seen how this acquisition will influence the promotion of the FIA Formula 1 championship, we welcome this long-term investment in Formula One by a company that has such a broad portfolio of sports, media and entertainment businesses,” said FIA President Jean Todt. “As motor sport’s governing body and regulator we acknowledge Liberty Media’s wide expertise in these fields and we look forward to working in close partnership with them in the future in order to further develop Formula 1 and bring it to new generations of motor sport enthusiasts around the world.”

The FIA is the owner of one percent of the shares of Delta Topco. The value of this share in cash terms is $40 million. The FIA will probably be forced to accept the terms of the sale as it agreed to certain tag along/drag along terms when it did the deal to buy the shares, which were believed to have come from Bernie Ecclestone. This will mean that the federation will have to accept loan notes which can be translated into Liberty Media shares at a later date and can then be sold once the lockup period is over. The share deal was part of a 2013 deal with the Formula One group over how much the federation should be paid to sanction the World Championship. The deal runs for the period 2013-2020 with agreement to renew it on substantially the same terms until 2030 after which they agreed to negotiate in good faith for a further deal, which meant that neither party would try to start their own series.

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.

The deal is confirmed

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.

For fans, the world of Formula 1 can be a little complicated and difficult to understand and it is not easy to find explanations. You cannot get a pass to go into the paddock and ask questions and you don’t know other race fans who can explain things to you. How do you find out? And how can you get to feel part of the event? There is an answer which will mean that you can find out pretty much anything you want to know about the sport, and you can discover it in a convivial atmosphere, with drinks and a buffet dinner on the day before the race meeting begins, when you can not only meet one of the most experienced F1 observers, but you can also meet other F1 fans in Singapore. You get a lot for your money, with a whole evening of questions, plus food and drink, all of which is included in the very reasonable ticket price. It is terrific value for money – and a great way to feel part of the event.

I will be hosting one of my Audience with Joe events on Thursday, September 15, at the Tanglin Club, which is conveniently located not far from the Orchard and Newton MRT stations, or an easy cab ride from the Marina Bay area. The event runs from 7pm until 11pm and I will answer any question that you want to ask, or at least I will tell why I cannot answer it! And you won’t get sponsor-friendly wishy-washy answers. I say what I think. I’ve been kicking around for nearly 30 years and know all the movers and shakers, so I get some interesting access that other journalists cannot get.

My goal in hosting the event is to engage with fans. It may be complicated and may seem unfriendly sometimes, but I believe that we should share our passion for the sport and knowledge of it with as many people as possible.

“I attended an evening with Joe in Singapore last year and it was an excellent event,” wrote one fan. “Joe had the audience enthralled with his knowledge, stories and insights. He shoots straight and is incredibly candid. You will for sure walk out of the room knowing far more than you ever thought possible. One snippet about a particular legend of the sport alone made it all worthwhile. And this year the wine, beer and food are all included! Make sure you arrive in Singapore on time for 7pm!”

To book tickets for this unique event, click here

It is expected that there will be an announcement later today, or tomorrow about the sale of the Formula One group by CVC Capital Partners. The buyer is the US firm Liberty Media, or some vehicle belonging to it. The initial phase of the deal will involved the transfer of CVC’s 35.5 percent share to Liberty and the payment, I hear, of $1 billion. The actual amount of cash required to complete the deal is only around $4.4 billion because the debt that CVC has incurred which will, no doubt, be replaced by borrowings that Liberty will make. Who knows? Perhaps some of the debt will be paid off. This is not the sort of things that finance people tell the world. If the CVC shares go with all the conditions that existed prior to the sale we will see Liberty gradually picking up the shares of the others involved as it is believed that many of them have drag-along or tag-along clauses, which mean that they have agreed to sell when CVC sells. This means that they are committed to sell. Now, some may decide to ask Liberty if they can re-invest and thus there can be paper transactions with shares being converted into different shares, and in some cases there may be people who take money and shares. However, all of this will not happen until Liberty has run the while thing past competition authorities to see whether they have any objections. There is no reason that there would be problems with the sale, as long as this does not get mixed up with F1’s other competition issues, but there might be a question mark over the fact that Liberty also owns a chunk of Formula E. This should not really matter. Formula E is small potatoes in the stew of international motorsport and the fact that one group owns the commercial rights to two championships is not that exciting. If the rights of these two are bundled in the future perhaps it could be a problem, but united ownership will help to create a situation where races never clash and perhaps we can see some crossover between the two. It would be fun, for example, to see F1 stars take a weekend off and race in Formula E in guest appearances?  One of the reasons that Malone has bought the sport is to get access to content that he can use for his many and varied TV networks around the world. He is not a content creator, but he does want to pull more viewers to his empire and using f1 is a good way to do it. If he can offer F1 for less than it is offered today, then he will find viewers. And he can also make sure that his rivals who want to sell F1 to their customers will have to pay more for the privilege.  One would imagine that Sky will now have a bit of a rethink… One thing that Liberty will almost certainly do is to switch focus in F1 much more to the United States, where it has many millions of customers. This has got to be good for the sport because one can imagine that careful promotion in the US will create new revenues, as merchandising and such things will become more important. When you have the world’s biggest consumer market within your grasp, it makes no sense not to reach out. This has always been a weakness of modern Formula One, but to make it work will involve some more sensible race fees and more of a sense of investment. Under Liberty, I also see many firms deciding that they will want to get involved in F1 as sponsors. We will see. As to who owns what in the long term we don’t really know what has what rights to which shares. There are shares that used to belong to the now-defunct Lehmann Brothers empire that are earmarked for CVC. That is 12 percent, which is worth about $1 billion in theoretical value. There are also financial firms Waddell & Reed (20.9 percent), Norges Bank (4.5 percent), the Teachers’ Retirement System of Texas (4.5 percent), JP Morgan Whitefriars (3.0 percent) and Black Rock (2.6 percent). Then there are those with personal involvements: the Ecclestone Family trust fund(s), which are unrelated to Bernie Ecclestone, which own 8.5 percent. Bernie himself owns 5.3 percent. The two have to be careful to act as separate entities as the authorities are not keen on trust funds that do not acts trusts and governments are prone to impose taxes on such entities if they can prove collusion. There is Churchill Capital which got 0.7 percent for introducing Bernie Ecclestone to CVC Capital Partners. That may not sound much but it amounts to about $35 million.  The FIA owns one percent of the business as well and that is worth about $44 million (on paper). However the federation has to now sell as it is bound by a drag-along deal. What happens to this money will be interesting. The last time the FIA made a big deal, it was all given to the FIA Foundation charity, but I don’t expect that to happen this time. Jean Todt would be smart to invest in the sport around the world. There are various directors and staff (and former staff) who own 3.3 percent of the business between them. Some of these will be surplus to requirements under the new regime. There was talk of the sport ending up being listed on the NASDAQ stock exchange, perhaps as part of a bigger entity, but it is hard to imagine that transparency will come easily to F1…

The big question that remains is whether or not the new owners will want to keep soon-to-be 86-year-old Bernie Ecclestone involved. I have no idea. He would be a useful man to have on-side because the new owners must get down to the business of negotiating a new commercial contract with the team teams for 2020 and beyond. Bernie knows how to push the teams around, although he has been less successful of late at this with Mercedes and Ferrari pushing back. The negotiation will not be easy but Liberty must understand that it will be best to give aways a little more and work with the teams and promoters rather than squeeze them until they squeak, as CVC has done. A little good will and working together will help F1 enormously. It is certain that change will now come, but the key point is what that change will be. Doing it the American way will be most interesting… There is so much room for development in the digital world, in merchandising and in customer relations.

IMG_0051The joys of Italy have often, during my career, been related to the Internet, or rather the lack of it. I shudder to remember all the adventures I have had when trying to file copy. Here at the hotel in Monza, the last few days have been a minor nightmare, unless I sit in the lobby and type there. It’s a way of meeting people, I suppose, and I did have a nice long chat with Eddie Jordan the other evening, something that is hard to do in the F1 Paddock where EJ is a bundle of distraction and ploughing a straight course of conversation with him is almost impossible.

Conversations in the F1 Paddock are often disjointed because of interruptions and it is often quite frustrating. I spent about 15 minutes at one point on Saturday evening trying to get just a few words with Toto Wolff, but a stream of people came along and interrupted, or Toto felt the need to grab others as they were passing by. I understand why this happens and I am a very patient man, but there are ways to do these things. Some people know how to do it, and others do not. It is, I always feel, a good way to judge the way people are. The reason I mention this is that it was thanks to just such a rude interruption that I got the confirmation I had been searching for all weekend about the sale of the Formula One group by CVC Capital.

And it came straight from the horse’s mouth.

I will come out and admit, straight away, that I never liked the cut of Donald Mackenzie’s jib. I’m not someone who is impressed by money, power or appearance. I judge people on their intelligence, their honesty, their good manners and other such old-fashioned things. A grouse moor, some guns, green wellies and a Land Rover do not make you an aristocrat. Just as a press pass does not make you a pork-pie hat wearing monster.

I am sure that Mackenzie oozes charm at dinner parties with his own kind, but I have always found him arrogant, rude, and disdainful, as only the newly-rich can be. His “well, you couldn’t possibly understand” attitude was a very clear sign that he was high on his own supply and, in the words of Shania Twain, “that don’t impress me much”. Good for him for being talented at making money, but I’m not ever going to praise what he did to Formula 1 and I am happy to apply my boot to the rear of his twill trousers to assist him towards the door marked “uscita”.

I was chatting with Ron Dennis on the grid when Mackenzie sailed up and butted straight into the conversation and Ron, knowing which side his bread is buttered on, immediately responded with a big grin. I no longer existed. I was the invisible man. Lots of people are prone to do this and one has the choice of making a remark about politeness, which always creates an awkward situation, or one can withdraw gracefully once it is established that they are not going to even say “excuse me”. Mackenzie, alas, clearly missed the class about having class, but he was so convinced of my invisibility that he said “this is my last race” to Dennis. It is rude to listen to the conversations of others, but if they butt in and blurt things out when you are still part of the conversation, it is not your fault. So as far as I am concerned that is fair game. So Donald confirmed that the sale is completed.

Perfect. My notebook reads “Donald ducks out”.

So goodbye Mr Mackenzie, it’s back to asset-stripping rubbish bin manufacturing firms for you. Your days in the F1 sunlight are over. And, here in the land of sport, we are rejoicing. The day of the jackal is over. I see all financiers as unprincipled and greedy, and he sees all journalists as being bad people. East is East, and West is West, and never the twain shall meet.

One is tempted to look at the sale of the sport as being a day of liberation. We have seen the last of an occupying army and the Yanks are coming, with Shermans, chewing gum and chocolate, and nylons for the ladies. We can dance the night away. We have no idea whether the liberators will be a good thing, but right now, we really don’t care. We can worry about that tomorrow. Today is the time to weed out the collaborators, shave their heads and throw them in the rivers, or be more colourful and defenestrate them, as they used to do with ghastly Regents in Prague. It is a time when we can all pretend that we resisted and award ourselves medals. It’s a time when the scalawags will call for reforms and the carpetbaggers will arrive, looking for opportunities (Wow, was that Flav at Monza, or someone who looks like he’s had a face job to look like Flav?) It is a time when charlatans, snake oil salesmen and cowboys all pop up. The Malone Gang is coming to town and we will all peep out from behind the curtains to see what they look like. Chase Carey has a good name to be a gunfighter and maybe he has a lot of notches on his six-shooters. We’ll see…

The cynics will say that all revolutions go full circle and you end up with another version of what you originally had, but others see change as a chance for enlightenment and new attitudes. What F1 needs now is reconstruction. A Marshall Plan for the sport to get it moving, make it cool again and attract the young of today.

The notebook from Monza features lots of stories of drivers: Perez-Renault? Sainz-Enstone? Pastor Maldonado? and other such scribbles. It is all still up in the air, but the market is now on the move and so we will see some action soon. I think the scrawls that are most likely to happen are “Ocon to Renault” and “Stroll to Williams”. The latter may read like a reminder, but it is actually a news story. The note $25 million next to it is all the explanation required.

There are other notes that say “Manor sale” and “Aus-China” which tell their own stories, but there is also the more cryptic “Apple-EU”, which was designed to remind me that the EU Competition Directorate is now back from the summer holidays and in a feisty mood, having walloped Apple Inc with a massive tax bill. These things take time, but one day soon the notebook is going to have a scribble that says “F1-EU” and one wonders if the Malone Gang know of this booby-trap.

Screen Shot 2016-09-04 at 16.25.37The Italian Grand Prix was settled, pretty much, at the start. Nico Rosberg got away well, but Lewis Hamilton did not. The result was on the run down to the first corner Hamilton dropped to sixth place. Nico was ahead and gone, chased by Sebastian Vettel, Kimi Raikkonen and Valtteri Bottas. Lewis had to pick his way past Dan Ricciardo, then Bottas and later in the race his strategy took care of the two Ferraris. But by the time he was second Rosberg was 11 seconds up the road. Lewis charged, closed the gap to 10 seconds and then had a moment at the first chicane and decided that second would have to do. For Ferrari there was something to get excited about with a podium finish for Vettel and Kimi Raikkonen fourth, while Red Bull had to make do with Daniel Ricciardo in fifth and Max Verstappen seventh, covering after a poor start that dropped him to 11th. The minor points were fought over by Williams and Force India, with Team Willy doing a better job on this occasion and retaking fourth place in the Constructors’ Championship. It was probably the least exciting race of the season so far, which was a shame, as we have had a strong of good races. F1 now heads off to Asia where there will be plenty of excitement as the cars battle on the streets of Singapore.

Also in GP+ this week…

– Felipe Massa retires
– Jenson Button doesn’t (maybe…)
– We look at the Italian GP of 1976, a race of guts and scandals
– We interview Esteban Ocon
– We remember Jack Sears and Fred Opert
– Susie Wolff dares to be different
– JS on the magic of Monza
– DT examines the adventures of Max Verstappen
– The Hack looks back to James Hunt – and to Belgian robbers
– Plus the usual fabulous photography from Peter and his team of snappers

GP+ is the fastest F1 magazine. It comes out before some of the teams have even managed to get a press release out. It is an e-magazine that you can download and keep on your own devices and it works on computers, tablets and even smartphones. And it’s a magazine written by real F1 journalists not virtual wannabes… Our team have attended more than 2,000 Grands Prix between us.

GP+ is an amazing bargain – and it is designed to be, so that fans will sign up and share the passion that we have for the sport. We don’t want to exploit you, we want you to join the fun. You get 23 issues for £32.99, covering the entire 2016 Formula 1 season.

For more information, go to www.grandprixplus.com.