Friday, 3 July 2015

Commentariat raise doubts over Formula One "vanity buyers"

I'm sure many Betaville readers will be watching British Grand Prix this weekend. So, do get in contact if you happen to spot a representative from any of the potential bidders, such as Qatar Sports Investments, circling Formula One in the VIP boxes. A cheeky photo of the Qataris at Silverstone wouldn't go amiss, too.

Or, perhaps the Qataris won't turn up after being outed in the Financial Times last week as potential suitor for Formula One by teaming up with American sports and property tycoon Stephen Ross, owner of the Miami Dolphins? The Qataris and Ross were reported to be willing to pay between $7billion and $8 billion for Formula One.

In case you need reminding, here is a link to that FT piece by a former Telegraph colleague, Malcolm Moore:

Qatar's decision to look at buying CVC's stake in Formula One is certainly a bold move by the tiny gulf state. But I'm not sure the Qataris - who recently purchased luxury hotels Claridges, the Connaught and the Berkeley for well over £1 billion - are in pole position to purchase the sport. In fact, from what I'm hearing Qatar is at the back of the grid.

Indeed, there is a strong view in the UK that Formula One shouldn't be sold to a "vanity bidder" with the biggest cheque book. This is because a genuine turnaround plan for Formula One is more important for the long term future of sport than a large pile of (leveraged?) cash from another financial buyer or sovereign wealth fund.

Earlier this week The Daily Telegraph reported that Donald Mckenzie, the boss of CVC, as saying there is "some urgency" in the need to liven up the sport. Here is a link to that piece:

Mckenzie isn't the only well-known name connected to the sport talking about change. Max Mosley, the former FIA president, wrote in a column penned for the The Daily Telegraph that if Formula One remains on its current path, it is headed for a "major crisis".

"The futures of six out of 10 teams on the grid are uncertain, there is too much artificiality in the racing, costs are far too high, and all that is giving us uncompetitive –and at times - boring racing," wrote Mosley.

He added: "Once spectators stop coming, the Grands Prix are no longer viable for the organiser. If television audiences go down, Bernie Ecclestone has to trim down the contracts. From then on it becomes a downward spiral. And for CVC Capital Partners, the majority shareholders, it becomes especially difficult when they are trying to offload the sport."

Mckenzie and Mosley's views were echoed by The Evening Standard's letters page, which was bristling with indignation this afternoon (see below the letter from Chris Thompson, who I think is Partnerships Director and Interim CEO of the Grand Prix Supporters Association).

So would Sky or Liberty, reported by The Sunday Times last weekend to be looking at entering the auction for Formula One, be better proprietors for the racing sport?

Sky is said to see the acquisition of Formula One as a way to take control of premium motor-racing content. It already runs a dedicated Formula One channel and broadcasts every race, qualifying session and practice session on TV. Meanwhile, Jon Malone's Liberty would clearly like to steal a march on one of its closest rivals by owning Formula One.

But, according to my banker with an inside track on Formula One's financials, the company generates between £160 million and £180 million of EBITDA a year. Given the latest rumoured (and I mean rumoured) asking price for Formula One is $9.4 billion, it will be hard for these listed companies to justify paying such huge earnings multiple for the sport.


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