The Plot Thickens: News Corp Explores F1 Racing Takeover Bid?

ApexOversteer · Apr 19, 2011

SkyNews said:

News Corporation, the global media group, is in the early stages of talks about forming a consortium that would seek to acquire control of Formula One (F1) motor racing, I have learned.

News Corp has been in preliminary talks in recent weeks with people connected to at least one of F1s big car manufacturers, and with Carlos Slim, the Mexican billionaire who is the worlds richest man, about working together on a prospective takeover of F1. JP Morgan, the Wall Street bank (and a former F1 shareholder), is advising News Corp on the situation, which is at an embryonic stage, Im told.

Participating in a consortium that would buy F1 is only one of several options that News Corp is examining in relation to the sport, which may come up for sale during the next 18 months.

I should say for the sake of clarity that there is a good chance that News Corps deliberations and talks with outside partners will not ultimately lead to a bid given the complexity of a deal and other competing claims on the media companys finances (likely to include a renewed bid for the rest of BSkyB that it doesnt currently own). In the context of other situations that it is looking at, News Corp's interest in F1 could quickly fade.

Its also worth saying that F1s current owner, the private equity group CVC Capital Partners, is understood to be unaware of News Corps potential interest and that there has so far been no contact between them.

Im also told that News Corp could decide not to acquire a direct stake in F1s owner but instead attempt in future to buy the rights to broadcast the sport across its TV platforms.

James Murdoch, News Corps deputy chief operating officer (and the chairman of BSkyB), has had a long-standing interest in F1, and is involved in the companys discussions with prospective partners.

(If all this sounds rather undefined, thats because things are at such an early stage. The only option that appears to be off the table, according to my sources, is a solo bid for F1 by News Corp.)

The company is kicking the tyres, as you would expect, given that there may be a serious business opportunity to examine in relation to F1, a person close to the sport told me this evening. It has been approached by a number of potential co-investors and is thinking about its options but there is a very real chance that it will come to nothing.

I should make the usual point given that Im reporting about News Corp: the company owns about 39 per cent of BSkyB, the owner of Sky News. And, of course (if you needed reminding), News Corp is in the process of trying to buy the majority of shares in BSkyB that it doesnt currently own, a move which is awaiting the approval (or otherwise) of the Government.

Slims prospective interest in F1 is not a surprise given that he already sponsors the Swiss Sauber team and its rookie driver, his compatriot Sergio Perez. According to Forbes magazines poll of the worlds wealthiest people, the Mexican billionaire is worth $74bn, meaning that he would have easily enough firepower to help News Corp finance an offer.

News Corps potential interest in acquiring F1 in conjunction with at least one other investor is interesting for a number of reasons.

For a start, it could have a major impact on the broadcasting of the worlds most glamorous sport, which has had a poor track record in terms of building large audiences on pay-TV platforms.

Major car manufacturers (the likes of Ferrari, Mercedes and Renault) and the multinational companies which sponsor F1 have historically pushed for it to remain a principally free-to-air TV event because of the vast audiences it guarantees for each race in the F1 calendar. Grands Prix are currently shown in the UK on the BBC, whose deal expires in 2013.

Analysts believe that any move by News Corp to acquire a shareholding in F1 would be likely to see it retaining free-to-air coverage, or combining it with some form of pay proposition.

News Corps exploration of ways in which it could be a part-owner of F1 while exploiting its worldwide appeal reflects the companys interest in accessing the one global sports franchise that has so far eluded it.

International viewing figures for F1 have broadly declined in recent years, particularly among the demographic of young men that is of greatest interest to TV advertisers. Im told the company believes partial ownership of F1 could help it accelerate the delivery of new services in a bid to widen the sports audience.

If News Corp was ultimately to be successful as part of a consortium buying F1, it would represent an escalation of its strategy of owning premium sports content. Sports assets it has previously owned include the LA Dodgers baseball team and the rugby Super League in Australia. BSkyB, the UK pay-TV operation, failed with an attempt to buy Manchester United in 1998.

Its worth mentioning that back in 2002, News Corp was reported by UK newspapers to have been interested in taking a stake in F1 after the implosion of Kirch, the German media empire which owed News Corp in the region of £1bn.

Nothing came of that reported interest. If it does formally decide to revive it, the New York-based media group would have to bear in mind a number of factors likely to influence the outcome of any deal, according to people close to the sport.

1. I have it on good authority that while News Corps interest in formulating an offer for F1 is genuine, its conversations with potential partners such as Slim, are at an early stage, and the company has not yet decided whether to get serious. It has not made a formal approach to F1s owners.

2. CVC Capital Partners, the private equity firm which owns F1, has not yet put the sport up for sale.

As those who follow the business of F1 will know, CVC bought the sports commercial rights-holder in 2005 and 2006 from a group of three banks (including JP Morgan) and Bambino Holdings, the family trust of the F1 supremo Bernie Ecclestone, who is now the sports chief executive.

Private equity firms typically hold their investments for between three and seven years, so we are now well into the window of when CVC might be expected to consider its options for the business.

That said, CVC has not yet appointed external advisers to handle a sale, and Ecclestone recently told Pitpass.com, an F1 news website, that although people are knocking at their door all the time, CVC is not looking for any exit over the next two or three years.

3. Its difficult to know exactly how much it would cost to buy F1 because the sports value is tied so intrinsically to the length and shape of the commitment of the participating manufacturers, international broadcast deals and so on.

The current deal (known as the Concorde Agreement) between F1s governing body (the FIA) and the teams, which governs the distribution of commercial revenues from the sport expires at the end of next year. Some of the teams are pressing for an imminent formal opening to negotiations about the next Concorde deal, which might involve them seeking a larger share of the sports revenues.

CVC paid north of $2.5bn to gain control of F1 in 2005-06 (it bought the shares in several tranches), although its value is likely to differ today.

4. It isnt clear how News Corp would finance an offer for F1 given that it would need to find more than the £7.5bn it offered last year to fund a full takeover of BSkyB. The financial assistance of a partner to buy F1 could prove to be helpful in that respect.

5. The investigation being conducted by a German prosecutor into a $50m kickback allegedly paid to Gerhard Gribkowsky, a banker who helped facilitate the sale of F1 to CVC, may make it harder to sell F1 until the matter is resolved.

As I reported at the weekend, the Munich state prosecutor is trying to progress the case before she leaves her role at the end of May. A parallel investigation commissioned by CVC and the board of Delta Topco (F1s current parent company) is also continuing.

6. Even if it does decide to bid for F1 in conjunction with partners, News Corp, which is dealing with the fallout from various investigations into phone-hacking in the UK, would be unlikely to have the field to itself. A number of sovereign wealth funds from the Middle East are understood to be interested in buying F1, while other media companies and private equity firms would also assess whether to make an offer.

A News Corp spokesman told me tonight: News Corp does not comment on speculation.

CVC declined to comment.

UPDATE 22:40: The Telegraph website is carrying a story quoting Ecclestone as saying that talk of News Corp's interest in F1 is "rubbish" and that the sport is "not for sale".

Bear in mind that that's not a denial of anything I've reported tonight. As I wrote earlier, CVC has not yet put F1 up for sale, while News Corp's interest is at an early stage and there hasn't yet been contact with the sport's current owners.

The headline on the Telegraph story, saying that Ecclestone denies News Corp is "ready to bid for F1", also confirms what I said earlier - that it may be many months before the media group and any prospective partners are ready to table anything formal, if indeed they do at all.
Click to expand...

Source

Ferraripilot · Apr 19, 2011

Reallllllyyy

Russ Birch · Apr 19, 2011

I am currently on my knees praying this happens. Just about any 3rd grader could do a better job than Bernie. Bernie could retire and go off to manage carnivals. Hell, he could design sprinkler systems... YEAH That's it!!! 4 cylinder turbo charged DRS mitigated lawn sprinkler systems!!!

madmaxatl · Apr 19, 2011

Theres a good chance they will F it up, just like they did the WSJ.

SSNISTR · Apr 19, 2011

Russ Birch said: ↑

I am currently on my knees praying this happens. Just about any 3rd grader could do a better job than Bernie. Bernie could retire and go off to manage carnivals. Hell, he could design sprinkler systems... YEAH That's it!!! 4 cylinder turbo charged DRS mitigated lawn sprinkler systems!!!
Click to expand...

Don't forget Bernie is AGAINST the 4-bangers, he wants to thankfully keep the V8's. Todt and the FIA want that crap.

Wolfgang5150 · Apr 19, 2011

Wow! Intersting development; thanks for posting....

Gatorrari · Apr 19, 2011

Is James Murdoch related to Rupert?

Wolfgang5150 · Apr 19, 2011

Gatorrari said: ↑

Is James Murdoch related to Rupert?
Click to expand...

His son; he's been in the f1 paddock alot recently....

DF1 · Apr 20, 2011

http://www.planetf1.com/news/3213/6885416/Bernie-F1-Is-Not-For-Sale

Wolfgang5150 · Apr 20, 2011

DF1 said: ↑

http://www.planetf1.com/news/3213/6885416/Bernie-F1-Is-Not-For-Sale
Click to expand...

Although it's not his decision; it's cvc's......

BartonWorkman · Apr 20, 2011

Interesting as there have recent rumours in Europe
about Red Bull buying F-1.

Let the bidding war begin.

BHW

Formula1Fan · Apr 20, 2011

If Bernie has the say this won't happen. F1 is his stage.

S Brake · Apr 20, 2011

madmaxatl said: ↑

Theres a good chance they will F it up, just like they did the WSJ.
Click to expand...

Care to explain?
By all accounts the WSJ is doing just fine, increasing readership while most print papers are struggling.

JoeGuitar · Apr 20, 2011

S Brake said: ↑

Care to explain?
By all accounts the WSJ is doing just fine, increasing readership while most print papers are struggling.
Click to expand...

No kidding. Newscorps purchase of the WSJ has proven a very lucrative transaction. Are you referring to your own personal tastes?

Ferraripilot · Apr 20, 2011

BartonWorkman said: ↑

Interesting as there have recent rumours in Europe
about Red Bull buying F-1.

Let the bidding war begin.

BHW
Click to expand...

I could see Red Bull and Carlos Slim getting in on this together. Hoping they can get the Fia out of being the green police to F1.

VIZSLA · Apr 20, 2011

Just to complicate matters. German prosecutors are looking into the deal where the FIA sold the commercial rights to F1. If it progresses this may throw a spanner into the works..

Wolfgang5150 · Apr 20, 2011

I like how Bernie says they would never sell to a media company; yet that's exactly whT he did in 2000! (kirch)

Napolis · Apr 20, 2011

Bill o Reily F1 Comentator.

What's not to like?

VIZSLA · Apr 20, 2011

Napolis said: ↑

Bill o Reily F1 Comentator.

What's not to like?
Click to expand...

Where to start?

430man · Apr 20, 2011

Jim you crack me up...

But on a serious note, there are so many rumors and disclaimers in this story I'd give it no more cred at this time than SGIAB. (some guy in a bar)

S Brake · Apr 20, 2011

Napolis said: ↑

Bill o Reily F1 Comentator.

What's not to like?
Click to expand...

During rain races he wouldn't be able to say viewers are entering the no spin zone.

Napolis · Apr 20, 2011

S Brake said: ↑

During rain races he wouldn't be able to say viewers are entering the no spin zone.
Click to expand...

Wolfgang5150 · Apr 20, 2011

Kind of a morbid thought; but CVC might be looking to unload while Bernie is still mentally, sharp & active. He is 80 years old after all....

Formula1Fan · Apr 20, 2011

If they want to get into F1 somebody tell them to invest in Austin. They could use their media to promote their own products.

Modenafan · Apr 20, 2011

Article today:

http://www.deadline.com/2011/04/james-murdoch-facing-serious-opposition-to-new-corps-formula-one-takeover/

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