19/12/2011
NEWS STORY
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When it comes to talk of Formula One being sold, this year has been one of the busiest ever. There was of course the groundless speculation about beleaguered media company News Corporation taking over the sport. Carlos Slim, the world's richest man, was initially believed to be interested in it, as were numerous investment banks. Abu Dhabi sovereign wealth fund Mubadala was thought to be making a bid but F1's boss Bernie Ecclestone debunked that. Last month he said he has been advised to float F1 in Singapore and now he has shed light on another exit route for the sport's current owner private equity firm CVC.
The news is revealed in an article in the Express newspaper by Pitpass' business editor Christian Sylt. In it, Ecclestone reveals that Hellman & Friedman, a San Francisco-based private equity firm which owns picture library Getty Images, is interested in making a bid for F1.
In addition to its shares in Getty, Hellman & Friedman owns stakes in alarm manufacturer Securitas Direct and research firm Nielsen. In February 2000 it bought 37.5% of F1's holding company SLEC for an estimated $712.5m and made a profit of around $630m on selling it just three months later to German media firm EM.TV.
In May, Pitpass reported Ecclestone saying that he "would have no problem" if CVC sold to another private equity firm. Hellman & Friedman carried out research into F1's finances over the autumn and Ecclestone says that it is "scratching around talking to people. They are buyers of anything." However, he adds that "Donald [Mackenzie, CVC's managing partner] has never spoken to them."
In 2006 CVC paid $1.7bn for a 69.6% stake in F1 and the fund which holds its shares has a maximum term of 13 years from when it was fully funded. This was in 2005 so it would seem that CVC has to sell its F1 stake by 2018. Last year Ecclestone said he believes that F1 is worth "six or seven billion dollars" but its value is likely to get a boost when the sport's 12 teams sign a new contract committing them to race.
The contract, known as the Concorde Agreement, expires at the end of 2012 and also governs the teams' share of F1's spoils. This currently stands at 50% of the sport's underlying annual profit but the teams have suggested they want more. When the contract previously came close to expiring they threatened to set up a rival series if their take did not increase. Ecclestone's strategy was to dent their unity by offering substantial payments to get Ferrari to commit to F1. The rest is history.
The current draft of the Concorde prevents the teams from making any public statements about a rival series until the end of the 2012 F1 season. It also states that Ecclestone cannot make an offer to one team unless he "makes an offer to all of the teams on terms which are the same in all material respects." However, this restriction expires at the end of this month and Ecclestone says that "in the middle of next year we will start looking at making offers to the teams." He adds that "we are not doing anything at the moment because we are not free to do the things we want to do until next year." Offering a payment to tempt the teams to sign should break this gridlock and pave the way for CVC to maximise its return on exit. Only time will tell how and when this happens.