17/02/2006
NEWS STORY
Ahead of next Wednesday's Extraordinary General Meeting of the British Racing Drivers' Club (BRDC), at which the future of Silverstone, including the proposed St Modwen/Northern Racing partnership, will be discussed, Alex Hooton has sent out the following list of 'FAQ' to members in attempt to clear up various points.
It's worth noting that the BRDC admits that the circuit could be reconfigured, which ties in with reports elsewhere that serious consideration is being given to the possibility of constructing several hundred homes. This of course comes at a time when the legendary Monza Autodrome is under threat - from nearby residents who are unhappy with the noise, even though they moved in after the race track was built.
The Q&A makes interesting reading:
In connection with the Extraordinary General Meeting to be held at The Jimmy Brown Centre on 22 February 2006 at 1.30 p.m.
Is this a "done deal"?
No. The terms of the proposed transaction were agreed with St. Modwen Properties PLC ("St. Modwen") and Northern Racing PLC ("Northern Racing") and incorporated in heads of terms signed on Friday 3 February, the day we called the EGM. These heads of terms do not commit any party to proceed with the proposed transaction but provide a basis for us to seek your support. If the Board does receive your support we will move forward to negotiate detailed agreements. These agreements will be subject to final Members' approval. The Board's current intention is to seek this approval at our Annual General Meeting scheduled for 28 April 2006, but it may well be at a prior or subsequent extraordinary general meeting depending on the timing of the negotiations with St. Modwen and Northern Racing.
Is this the best deal available?
Yes. The selection of St. Modwen and Northern Racing followed a rigorous and extensive tender process by KPMG Corporate Finance ("KPMG"). The Sub-Committee, KPMG and the Club's other advisers went through a formal process of evaluating each bid on its merits. The Board and KPMG regard the terms of the bids from St. Modwen and Northern Racing as being the best in the market.
KPMG will join us at the EGM to explain the tender process and why St. Modwen and Northern Racing were chosen as preferred bidders. We encourage you to join us on 22 February 2006 to hear what they have to say.
Are my rights as a Member safeguarded?
Yes. The protection of your rights has been and will remain a central concern to the Board in negotiating the transaction. A detailed description of those rights will be enshrined in the binding documents to be presented for your approval at the second general meeting. All parties are supportive of the Members retaining their existing rights and privileges at Silverstone. Furthermore, under the terms of the heads of agreement, both St. Modwen and Northern Racing have agreed that any variation to the Members' rights will require the Club's consent. Certain land (principally the Clubhouse) will be excluded from the leases to St. Modwen and Northern Racing and be retained by the Club.
What is the future for track days if Northern Racing takes control of the Silverstone Circuit?
Northern Racing are aware and supportive of the requirement to make the Circuit available for the purpose of BRDC Members' days race meetings, track days or charitable events.
Why don't we maintain the status quo?
The Board's firmly held view is that maintaining the status quo is not a realistic option for ensuring the long term future of the Club. The SCL team has taken great strides in improving the financial viability of our commercial operations at the Circuit since taking it back from IPG. However, present day Circuit operations are heavily dependent on the Grand Prix and involve substantial commercial risk and extensive on-going capital expenditure that maintaining the status quo simply cannot generate.
The recent loss of the Belgian Grand Prix from this year's calendar due to failure to complete capital works should serve as a warning to us all that tradition is no safeguard in the modern Formula One environment.
Why doesn't the BRDC voluntarily relinquish the Grand Prix?
Ultimately, of course, this question requires an analysis of the benefits to the Club in hosting the Grand Prix and the costs and risks of doing so. The Board believes that keeping the Grand Prix at Silverstone is consistent with the Club's object of promoting motorsport in Great Britain. It also believes that our position as host of the Grand Prix gives the Club greater standing in relation to motorsport issues. The value of Silverstone and the resultant commercial returns from its development is also enhanced because of its status as the home of the Grand Prix. The Board's view is that if the Club can be insulated from the commercial risk of running the Grand Prix, it is strongly in the Club's interest to retain it at Silverstone.
Why can't we develop the estate ourselves?
The BRDC is not a property development company. We have successfully undertaken small-scale development at Silverstone but we do not have the financial and other resources necessary to undertake development at the Silverstone estate on a scale that best realises its inherent value. The professional advice that we have received is that the only way to unlock the full potential of Silverstone is development under an overall "Master Plan" in relation to the whole estate and the integration of circuit operations within it. Furthermore, it is unlikely that planning authorities would allow development to release full value from Silverstone other than under a Master Plan for the whole Silverstone estate.
Why can't we continue to operate the Circuit ourselves?
Your Board is of the unanimous opinion that it is in the best long term interests of the Club to proceed with the transfer of operational responsibility to a capable and competent partner. The inherent risks, uncertainty and capital expenditure connected with the hosting of the Grand Prix and general circuit maintenance are felt by the Board to be inappropriate for what is essentially a private members' club with finite resources.
Why is it important to develop the estate and transfer operational responsibility in tandem?
As part of the tender process, the bidders were deliberately asked to submit unified bids for both the development of the Silverstone estate and the operation of the Circuit. All the professional advice that the Board has received indicates that the optimum financial and operational solution is for the developer and Circuit operator to work as one. Practical issues also dictate that the developer and operator work with mutual aims.
St. Modwen holds 27% of the shares in Northern Racing. The family of the late Sir Stanley Clarke holds a substantial stake in both companies and is represented on the board of each company.
Can we have further details on St. Modwen and Northern Racing?
A number of you have asked for further details about the preferred bidders in addition to that set out in the Chairman's letter. In response to this, we have invited both St. Modwen and Northern Racing to join us and give you a short presentation at the EGM on 22 February 2006. In the meantime, those of you with internet access can review their websites at www.stmodwen.co.uk and www.northernracing.co.uk.
Why grant a 150 year lease to St. Modwen?
The view of the Board's professional advisers was that it would not be possible to find an appropriate partner to develop the Circuit unless that partner was granted a long lease of at least this duration. This was borne out by the submissions received from bidders, some of whom asked for a longer term.
Why is the term of the lease with Northern Racing 25 years?
In our discussions with potential operators of the Circuit, the Board has been actively seeking a long term commitment. A 25 year term is the minimum that will allow an operator to invest in Silverstone and secure a return on its investment.
How will Silverstone be developed?
The nature and scope of any development of the Silverstone estate will be subject to the agreement of an overall "Master Plan" followed by detailed planning. Both of these processes will require the approval of the BRDC. The first phase of development is likely to include Circuit improvement works requested by the BRDC as well as hotel, residential and technology park development.
Will the Circuit be reconfigured?
Probably. Whether the Circuit is reconfigured will depend on a number of factors including the value to the BRDC, St. Modwen and Northern Racing of developing the land, the nature of the proposed development and planning and FIA approval. Members will recall that planning permission was granted in June 2001 for the reconfiguration of the Circuit and St. Modwen may wish to adopt this or a similar scheme.
When will the deal be done?
Your Board, St. Modwen and Northern Racing intend to complete the transaction at the earliest possible opportunity. One of the advantages of St. Modwen and Northern Racing bidding together is that, as related companies, they have demonstrated an alliance of interest and willingness to proceed at the earliest opportunity. If the Members approve the transaction at the EGM then the parties will proceed with detailed negotiations with a view to signing binding documentation in April. Members should note that the binding documentation will be subject to their further approval whether at the next Annual General Meeting (scheduled for 28 April 2006) or at a separate extraordinary general meeting.
On this timetable, Northern Racing would take over the operation of the Circuit later this year. The timetable for development will depend on the timing of the planning process.
How do we know that St. Modwen and Northern Racing will invest in the Circuit?
Investment in the Circuit has been a key objective in the tender process resulting in the selection of St. Modwen and Northern Racing as the preferred bidders to develop and operate the Circuits. St. Modwen have agreed to implement a Master Plan for the development of the Silverstone Circuit to be settled with the BRDC once binding agreements have been entered into and the Members approval given to the proposed transaction. Central to this Master Plan is the commitment from St. Modwen to procure and pay for, in accordance with a programme agreed with the BRDC, improvements to the Circuit specified by the BRDC with a total cost of up to £30 million.
The operating agreement with Northern Racing will contain performance criteria in relation to the operation of the Circuit. It will also oblige Northern Racing to use all commercially reasonable endeavours to obtain and retain the rights to promote the Grand Prix at Silverstone. Northern Racing has already invested £30 million in its courses and has recently unveiled a master plan to invest £20 million at Newcastle Racecourse.
How do the proposed transactions compare to the "IPG" deal?
Whilst the terms of the proposed transaction are very different from those negotiated with IPG, our guiding objectives have remained broadly the same. Your Board now, as in 2000, wishes to secure the financial future of the Club by generating sufficient funds to ensure the BRDC can pursue its time honoured objectives whilst safeguarding the Grand Prix at Silverstone for the foreseeable future. Although it is unfortunate that our relationship with IPG terminated early, IPG left us with a much improved Circuit and a very significant cash settlement.
Can Northern Racing operate a racing circuit?
Yes. Northern Racing is an experienced and professional sporting venue operator running nine racecourses in the UK on which 203 fixtures are scheduled to be run during 2006. Under the terms of the proposed transaction, Northern Racing will harness the motor racing expertise of the existing SCL team, which will transfer with the circuit operation business of SCL. Northern Racing will further add value through its financial resources allowing appropriate capital investment over the full 25 year term.
Northern Racing would bring to Silverstone the experience of planning and hosting high profile competitive events as well as local commercial and leisure activities. They are also used to dealing with professional bodies within an industry represented by diverse interests.
Can Northern Racing turn Silverstone into a horse racing course?
No. Any proposal to terminate or substantially curtail Motorsport activities at the Circuit will require the consent of the BRDC.
What about SCL's employees?
All of the employees who work in the Silverstone Circuit operations will transfer with that business on their existing terms and conditions of service. Northern Racing will need and value their expertise to operate the Circuit.
Who is in the BRDC negotiating team?
In early 2005, the Board created a Sub-Committee comprised of Jackie Stewart, Stuart Rolt, Alex Hooton and Andrew McAlpine. The Sub-Committee received valuable assistance from Robert Brooks in the later stages of negotiations. The Sub-Committee has reported regularly to the Board, which is unanimously of the view that it is in the best interests of the Club to proceed with both the development of Silverstone and the transfer of operational responsibility for the Circuit.
Who has been advising the BRDC during the bid process?
KPMG were instructed in summer 2005 to assist the Board in identifying appropriate partners to develop and operate the Silverstone estate. In addition Baker & McKenzie, who advised the BRDC on the IPG transaction in 2000, IPG's exit in 2004 as well as the renewal of the promoters' contract in 2004, are providing legal advice, King Sturge have been appointed as our property consultants and DB9 as planning advisers. Representatives of all these advisers will be at the EGM on 22 February.
What happens if Silverstone loses the right to hold the Grand Prix?
In the event that Silverstone loses the right to host the Grand Prix, there would be no direct impact on the transaction with St. Modwen, although the nature of development may change.
The BRDC and Northern Racing would discuss arrangements in relation to the continuation of the lease under which Northern Racing will occupy the Circuit. Also, the minimum fee payable by Northern Racing would remain at £250,000 (indexed by reference to RPI) for each of the first two calendar years following such cessation, following which it will be 30% of the net profit of NRS.
Why are the resolutions for the EGM not special resolutions, requiring a 75% majority?
Your Board wishes to give Members the opportunity to comment on what would be a major step change for the Club and does not wish to proceed without Members' fully informed support. Constitutionally, there is no requirement for any resolution of the Members at this stage. The purpose of the EGM is to seek Members' support for the proposed transactions and to secure your authority to conclude negotiations with St. Modwen and Northern Racing. Your Board is seeking as much support as possible for the proposed transaction.