Ecclestone seen gaining in F1 ownership shake-up

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Spectacle of speed Under the leadership of Bernie Ecclestone, Formula One has evolved into a sporting spectacle with 425 million television viewers. F1.COM

Spectacle of speed Under the leadership of Bernie Ecclestone, Formula One has evolved into a sporting spectacle with 425 million television viewers. F1.COM

BERNIE Ecclestone, the diminutive octogenarian billionaire who turned Formula One into a global, money-spinning juggernaut, might become even more powerful in the sport he has dominated for 40 years.

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He has a stake in the company that runs F1 and suggests, perhaps mischievously, that he might just increase it if an $8.5-billion sale of the controlling stake in the business goes ahead.

This year’s F1 season got off to a flying start the other weekend in Australia but the high-octane race series has been in the limelight all winter as rumors of a sale by its private equity owner CVC gathered pace.

“I think CVC will make a decision on the sale sooner or later,” said Ecclestone over lunch in a plush restaurant minutes from F1’s headquarters opposite London’s Hyde Park. “There are people who want to buy. Actually, two of the people have agreed the price. It’s just a question of whether CVC wants to sell or not.”

CVC has retained its 35 percent controlling stake in F1 for double its typical holding period despite reported interest from RSE Ventures, owner of the Miami Dolphins American football team, and investment firm China Media Capital.

CVC bought F1 in 2006 in a leveraged buyout financed with $1.1-billion of debt from Royal Bank of Scotland and a loan of $965-million from CVC’s investment fund IV. It has made an estimated $4.4-billion through dividends and share sales, but still holds 35 percent of F1’s Jersey-based parent Delta Topco, which is believed to be worth $8.5 billion.

Ecclestone’s legacy
Ecclestone turned 85 last October and his family trust has cashed in about $4.2-billion from F1 since he took over the sport nearly 40 years ago.

At the time, F1 was an almost amateur sport as each team made separate deals with Grand Prix promoters. Television coverage was patchy since races could be cancelled at the last moment if there weren’t enough cars to fill the grid.

Ecclestone’s masterstroke came in 1981 when he convinced teams to sign a contract committing them to attend every race. It meant F1 could offer guaranteed coverage to TV networks. Ecclestone’s private company, Formula One Promotions and Administration (FOPA), negotiated the deals in return for a share of proceeds.

In 1995 Ecclestone took a salary of $90 million from FOPA, which made him the world’s highest-paid executive. At the end of the year, he was handed the keys to the billionaire’s club when F1’s governing body, the Federation Internationale de l’Automobile or International Automobile Association (FIA), awarded his company the rights to run F1, rather than just broker the deals.

He now owns 5.2 percent of Delta Topco and said: “We will have to see whether I increase my stake. You never know what’s going to happen.”

Ecclestone speaks in a soft tone with a deadpan poker face. It’s part of a negotiating strategy that puts him in control as his sparring partners don’t know what to expect next. He insists he has no preference as to who takes over F1, saying, “You don’t know what’s going to happen until somebody buys and you see what they are like. How do you know if you will get on with them?”

His emotions show on the financial health of F1 teams, whose annual budgets have accelerated to $220-million. Two, Caterham and Marussia, crashed into administration at the end of 2014, with the latter rescued by Stephen Fitzpatrick, boss of energy firm OVO, who renamed it Manor.

“People ask me what is frustrating. What is frustrating is looking after people if they can’t stop themselves from spending money,” said Ecclestone. “Last year we gave a few teams, including Manor, an advance on their prize money. The team bosses are not business people.”

In contrast, Delta Topco is in top gear. Its latest accounts, for the year ending December 31, 2014 show that it booked a $519.8 million operating profit on turnover of $1.8 billion, largely generated from TV rights, official sponsors, corporate hospitality and race hosting fees.

Ecclestone has employed a savvy strategy of taking F1 to emerging markets to find new fans and boost race hosting fees. Countries such as Singapore and Abu Dhabi have used F1 to promote themselves as tourist destinations to the sport’s 425 million television viewers. The limited number of slots has fuelled a race in how much countries will spend to get a race, with the highest hosting fees rising to more than $60-million.

“We have got 21 races now. It could go more, but I don’t think it will. It’s enough. Some of the guys at the teams are shattered,” said Ecclestone. He revealed that organizers of a proposed race in Las Vegas “have a contract. Vegas would be super.”

However, the turbo-charged costs have priced out many European countries with F1 lacking a race in France since 2009 and the Italian Grand Prix at Monza under threat.

“Monza has got a contract for this year so it is going to go ahead. Next year is the question mark,” said Ecclestone. “I don’t think we have to have an Italian Grand Prix. Somebody once told me a funny thing that you couldn’t have Formula 1 without a race in France. But we do.”

TNS

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