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Private Equity Firm Might Receive Multiple Offers Over Formula One

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June 29, 2015

 

Rumours over the weekend suggest private equity firm CVC might be looking into selling its stake in the Formula One franchise, with a number of potential bidders emerging to take over in one of the world’s most famous motor sports.

 

CVC’s Involvement

 

The private equity firm currently has a controlling stake in Formula One. The company bought the 35.5% controlling stake in the franchise in 2006 from a group of shareholders, which included the likes of JPMorgan, Lehman Brothers and the chief executive officer Bernie Ecclestone. Mr Ecclestone currently has a 5% minority stake in the business, which he might be looking to sell together with CVC.

 

At the time, CVC paid £1.2 billion for the stake and according to Daily Mail, could expect to make five times their investment with a potential sale.

 

CVC’s involvement in the franchise didn’t come without controversy. Mr Ecclestone agreed to a settlement of almost £60 million over bribery charges relating to the 2006 deal a few years ago. For many analysts, the time has now come for the famous franchise to move on under new leadership.

 

In a recent BBC Radio 5 Live interview, Eddie Jordan, the former team owner in Formula One, said Mr Ecclestone should step down and move on. “I think he’s done a remarkable job, but time has played its role and he should go,” Jordan said, according to Daily Mail.

 

Qatari-Backed Consortium

 

It first emerged last week that RSE Ventures together with Qatar Sports Investments has offered to buy the controlling stake from CVC. Stephen Ross, the man behind the American football team Miami Dolphins, is the founder of RSE Ventures and the company is involved with a number of the world’s biggest sports.

 

Furthermore, the Qatari group is the current owner of the French football club, Paris Saint-Germain. Mr Ecclestone acknowledged to the Financial Times last week that talks between CVC and the Qatari-backed consortium have taken place.

 

New Bidders Emerge

 

But reports over the weekend suggest CVC might have a potential bidding war at their hands. According to Yahoo News, the British broadcaster Sky together with the cable conglomerate Liberty Global are also interested in buying the stake.

 

According to the reports, John Malone, the billionaire behind Liberty Global, has had informal talks with representatives of the private equity firm. Formula One is one of Sky’s most important sport broadcasts, especially as the company is facing increasing competition over the broadcasting rights of the English Premier League and European football.

 

Furthermore, fashion tycoon Lawrence Stroll has also been linked with a potential bid.

 

Moving On

 

Formula one is among the most valuable sporting events in terms of global broadcasting rights. Pay-TV companies are currently paying large sums to keep hold of these sporting events, especially as online rivals such as Netflix might look to make a move into the area.

 

The sport has also hit a small crisis, as visitor numbers to the grand prix events have dropped and viewer figures have faced slight declines.

 

According to the reports, CVC has hired Goldman Sachs to advice it on the potential bids. For the private equity company, the increased competition can only mean heftier returns. It’ll be interesting to see whether more interested bidders emerge in the coming days.

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