Shares in F1

[Greenlantern101]

CVC have completed a $1.6 billion deal to sell 20% of their stake to Blackrock ahead of next months initial public offering of shares in F1.

http://www.autosport.com/news/report.php/id/99763

With Williams F1 floating last year is this the future of F1, as a public owned venture ?

I am no banker or stock market gambler but even I can see that Williams form this year will of made some people rich. Their shares have doubled in value since mid August last year.

If F1 continues to grow as it is doing by going to new countries including the USA..twice then buying shares in F1 might just be worth looking at.

 

[sportsman]

Williams track form has only small bearing on their share price.These are the reasons for their increase in share value.

http://www.williamshybridpower.com/...liams-hybrid-power-sign-ground-breaking-trial Williams Hybrid Power has appointed Frank Thorpe to the position of Head of Bus Systems. In this newly-created role Frank will be responsible for the business development of Williams Hybrid Power's ground-breaking hybrid flywheel technology for the passenger carrying vehicle industry and lead its marketing and introduction into the sector.
Frank brings a wealth of bus industry experience to Williams Hybrid Power. He joins from Go-Ahead Group, where he worked in Business Development for Go-Ahead London. Prior to this he ran his family's business, Thorpes, a London-based operator that was acquired by Metroline in 2004.
In his new role, which will see him deal with both passenger carrying vehicle manufacturers and operators, Frank will continue to work closely with his former employer following the recent announcement that Go-Ahead Group and Williams Hybrid Power are collaborating on the development and production of six prototype buses with retrofitted hybrid flywheel systems.

This is what is pushing the share price up.And they are supplying their flywheel to Jaguar CX16

http://www.williamshybridpower.com/

 

[jez101]

I don't know much about Williams, but the $9.1bn valuation on the F1 group is high given the debt levels and the fact that the free cashflow is largely needed to pay for that to be serviced.

The debts are there because the owners have borrowed in the past to take dividends out. The company will have debts of $1.8-$2.2bn when it is floated. Detailed explanation here http://www.reuters.com/article/2012/05/18/formula-prices-idUSL1E8GI96Z20120518 near the bottom is a good 30 second summary.

Mostly though, it depends on what is floated. F1 in the past has sold F1 without selling all of F1, if you know what I mean

 

[Greenlantern101]

Interesting article on sky sports about the value of F1. Seems to be anything from 5.7 to 9.1 billion.
Thats rather vague, think I would wait a few months before buying anything. Don't want to get 'face booked' or Mugbook as I am now calling it.

http://www1.skysports.com/formula-1/news/12433/7772853/

 

[canis]

Also you have to be careful in which F1 company you are buying shares. It is more than possible to own 100% of FoM without actually having any rights to any of the profits because of the complex way in which the rights and financial holdings are structured.

It really wouldn't suprise me if they sell off shares in a company that gets no rights to the profits in any way...

 

[sportsman]

canis.Sound advice indeed.With Bernie involved its even more relevant.
Good article here from Christian Sylt the editor of Formula Money

http://www.guardian.co.uk/business/2012/may/25/formula-one-115-million-windfall?INTCMP=SRCH
Formula One's teams will share a one-off $180m (£115m) windfall from agreeing to sign a commercial contract which paves the way for the $10bn flotation of the sport on the Singapore stock exchange next month.
All eyes will be on F1's superstar drivers in Sunday's glamorous Monaco Grand Prix, but the deal makes their bosses the real winners as it will be the biggest single payment they have received from the sport.
The Concorde Agreement commits the teams to race until the end of 2020, and getting them to agree to the contract has been a crucial part of billionaire F1 boss Bernie Ecclestone's plans to float the business. "It's a good deal for the teams, it's great," said Ecclestone.

 

[Bill Boddy]

So the sport is worth $10,000,000,000 and the teams get a measly $15,000,000 each. At that rate you might expect that they would go it alone, you know, form their own association. Oh, hold on...

 

[jez101]

The extra money is just a sweetener. Teams already get 60% of the TV and circuit revenues and this looks to be going up to 70%. Like all good negotiators, Bernie has carved out the best bit though: trackside advertising is the most profitable of the revenue streams and that is not shared with the teams.

 

[Bill Boddy]

Exactly. It is all smoke and mirrors, it is made to look like the teams are getting a good bargain whilst Mr. Ecclestone is pushing wads of money into his back pocket. I just hope it is those Euros which will shortly be being exchanged for pre-war German Marks.

 

[Mephistopheles]

Trust me no matter how many shares are offered to the public it will never be enough for F1 to be known as a publicly owned concern it is just smoke and mirrors to trick people into investing without actually owning anything....

That is not to say a person who deals in shares couldn't make a bit of money out of it but F1 is just one of many investment options..

 

[FB]

Didn't Bernie construct the deal in such a way last time that someone else owned it but he kept the profits and that's why the floatation in Europe was blocked?

 

[Mephistopheles]

That wouldn't surprise me in the least FB to take profits from something he doesn't own would be just the sort business deal he would try and broker.

 

[siffert_fan]

Given the shenanigans alleged to have taken place in regards to the Facebook stock flotation, I shudder to think what would probably surround the F1 offering. The Facebook bigshots are babes in the woods along those lines relative to BE.

 

[jez101]

Didn't Bernie construct the deal in such a way last time that someone else owned it but he kept the profits and that's why the floatation in Europe was blocked?

I think what happened is that the Kirch and EMTV bought not understanding that no dividends could be paid until the (then $1.4 bn) loans had been repaid. This was bad because the acquirers has borrowed to buy SLEC shares and had to pay their own interest without any income from the sport.

 

[FB]

Well done Jez, thought someone would know.

 

[canis]

I am trying to find an old article I read around FoM and the way the companies are structured. Someone pblished it after many years of research and worked out how all the money worked.

Basically there is a single dividend share in FoM which has no ownership rights nor any voting rights, but it takes all the profits no matter how many other shares there are in FoM. This single share is owned by a company which is split in ownership between CVC and a number of trusts which ultimately all trace back to Bernie or his family in some way.

In the past Bernie proposed floating FoM in europe, and has done a number of deals around selling of shares in FoM to private investment funds. These shares have been bought and sold privately for a number of years but the thing that has always caused an issue is that even if you control 100% of the management/voting shares in FoM you get 0% of the profits. Hence you own the whole of a multi billion pound investment with no income to be made from it. This is what has stopped european stock markets allowing the floatation in the past (though it has not stopped Bernie getting people to buy shares privately and then laughing all the way to the bank).

It appears that this deal is structured slightly differently in that the way the ownership of FoM is being changed. The profits are being retained within FoM and being delivered to the owners of the shares. But, in order to allow this to happen FoM has to buy back the single dividend yielding share from the company owned by Bernie/CVC. Hence the rediculous amount of debt FoM will be in at the point of floatation. FoM will be effectively paying off the CVC debt (plus a little profit for them) and also putting money into Bernies pockets in order to make this happen. But as FoM has officially not made a retained profit for some time (all profits have been takn out to the company owning the dividend share) they don't have the money to do this in their cash reserves, hence they take out a HUGE loan to pay for it all.

Once CVC and Bernie have taken the money they get for this, they will then sell some of their voting share holdings in FoM, hence making more money out of the whole deal. Double pay day leaving the investors of the floatation owning a potential gold mine though only once they have managed to dig through the billions of debt that it has landed itself in.

Anyone want to invest now?

 

[jez101]

Here is a little chart I drew for myself back in March this year after an offseason trying to understand what really was going on. I read Tom Bower's book which just left me confused so I drew this based on the companies' official filing documents.

This has been pretty much confirmed as correct in the last few days with the official version published in the prospectus.

http://www.ft.com/cms/s/0/afde66a6-a685-11e1-968b-00144feabdc0.html#axzz1wG2aswVc

(sorry, registration required)

The reasons for this structure are best explained here http://www.pitpass.com/46407-F1s-5-tax-manoeuvre

It seems that a NewCo, Formula 1 Plc was registered in Jersey on 18th May. This is the New Topco, apparently replacing Delta Topco. I do not know what is happening to Delta Prefco in all this, but as you can see, this company owns 46% of the hospitality (not profitable) and trackside advertising (highly profitable) businesses.

 

[jez101]

The revenues generated in 2010 looked like this - note Formula One Administration Ltd (FOA) has since been replaced by Formula One World Championship Ltd (FOWC)

The revenues exist in the following categories

Managed by Formula One World Championship Limited
i. Circuit – race hosting fees, share of headline race sponsorship fee, share of gate receipts, share of food & beverage receipts
ii. Broadcast – payments by television, radio and internet companies for rights to cover the event. These rights are restricted to a set format and geography

Managed by Allsport Management SA
iii. Corporate Hospitality – the Paddock Club ($4,400-$6,800 per guest depending on circuit)

Managed by APM
iv. Trackside Advertising – banners and bridges visible on TV

Source: company filings and http://www.pitpass.com/43328-F1s-revenues-stall-but-its-debt-repayment-accelerates

The current commercial rights were acquired from the FIA by SLEC Holdings on 25th April 2001 for $313.7m. These rights apply from 2011 to 2110 (100 years) and allow the group to retain and redistribute all revenues generated by Formula One.

The FIA has licensed the rights three times:
1992 to 1996 Formula One Promotions & Administration (FOPA)
1997 to 2010 Formula One Management* (FOM)
2011 to 2110 SLEC Holdings

FOM transferred the rights to Formula One Administration in 1999. SLEC has assigned the 2011 rights to Formula One World Championship Limited.

This awarding of the Commercial Rights for 100 years was approved by the European Commission’s competition watchdog authorities as part of an investigation into the structure of Formula One was investigated between September 1997 & 2001. In 1997 the company voluntarily submitted itself for examination. On 29th June 1999 the Commission issued a Statement of Objection. On 29th October 2001 these were resolved & the examination was closed.

Allsport & APM are sub contracted their responsibilities by FOWC, which receives license fees from Allsport (but not APM) through Beta Operations ($68m in 2010). This reduces the profits from Allsport to almost nothing, leaving large profits in APM which get fed up the tree as described in the post above.

*The rights were granted to the company now known as FOM during 1996 while it was still called FOCA Administration. It took the name Formula One Administration in 1997 and became Formula One Management in 1999 when it was acquired and transferred the rights (and its name) to the new Formula One Administration.

 

[Brogan]

The flotation has been delayed apparently, due to the financial problems in the eurozone and also Facebook's disastrous IPO.

 

[sportsman]

CVC sells more shares.

http://www.autosport.com/news/report.php/id/100415 CVC has sold a further $500 million stake in Formula 1, almost a month after announcing a 21 per cent sale to a trio of investors for a total investment of $1.6 billion.
The sale also comes just 16 days after Bernie Ecclestone confirmed in Canada that the planned flotation on the Singapore Stock Exchange would be postponed in the wake of ongoing market unrest.
Waddell & Reed and its associates, who along with Norges Bank and BlackRock made the initial investment on 22 May, have now spent a further $500 million, taking its share to almost 21 per cent.
A CVC statement read: "CVC Capital Partners is pleased to announce that several funds managed by Waddell & Reed Investment Management Company and Ivy Investment Management Company have today agreed to invest a further $500m in a private placement in Formula 1 at $9.1bn enterprise value, increasing their aggregate stake to 20.9 per cent."