Azerbajichan is in - South Korea out

Private equity firm CVC Capital has made $8.2 billion from its investment in Formula One auto racing, according to new research.

CVC took a gamble when it bought F1 for $2 billion in 2006 in a leveraged buyout financed with two loans. The Royal Bank of Scotland (RBS) provided $1.1 billion whilst a further $965.6 million came from CVC’s $7.3 billion investment Fund IV. It came to 13.3% of the total amount available in Fund IV and was particularly risky since F1’s teams were threatening to start a new series due to a pay dispute.

The teams were pacified through a series of smart decisions made by F1’s chief executive Bernie Ecclestone. It led to F1’s revenues accelerating 31.7% to $1.6 billion over the past five years with net profits standing at around $378 million.

F1 is now understood to be valued at around $12 billion and CVC has got $8.2 billion of cash out and remaining value. It gives the private equity firm a return of 751.3% which is one of the highest it has made since it was founded in 1981 as the venture capital division of financial services firm Citigroup. Over the past 33 years CVC has invested in more than 300 businesses and secured $50 billion from investors including the California Public Employees’ Retirement System (CalPERS) which is the largest pension fund in the United States.

CalPERS invested $350.1 million in CVC’s Fund IV and data from the pension fund shows that it has made a 180% return on its money. In itself this shows that F1 is performing far better than some of the other businesses which the fund has bought. Indeed it is performing so well that F1’s teams are no longer talking about leaving but are instead considering investing in the series.

Last week Bloomberg reported that a group of the 11 teams is in discussion about buying a stake in the series. Although it did not name the parties involved with the talks, the most likely are the teams owned by Daimler, Ferrari and Red Bull. The most recent financial statements for these companies show that they have annual revenue of $162.6 billion, $3.2 billion and $8.8 billion respectively. They have more than enough resources to make a joint bid for F1 and although they have had numerous opportunities to do so in the past it has never led to anything.

“People say they are in talks about buying F1 but they haven’t got enough money to run the teams. Ferrari and Mercedes couldn’t buy it. There is no chance,” Mr Ecclestone told Forbes. It is no surprise that the teams have got their eyes on F1.

F1’s parent company Delta Topco is based on the British island of Jersey and it owns the licence to run the racing series until the end of 2110. This is incredibly valuable as it allows Delta Topco to grant the rights to host races and broadcast them on television. In 2001 Delta Topco’s subsidiary SLEC Holdings bought the 100-year licence for the bargain price of $313.7 million from F1’s governing body the Fédération Internationale de l’Automobile (FIA).

CVC is the biggest single shareholder in Delta Topco and it holds a 35% stake in it. The second-largest shareholder is Kansas-based asset management firm Waddell & Reed, which has 20.9%, followed by the estate of bankrupt investment bank Lehman Brothers with 12.3%. Mr Ecclestone’s Bambino family trust owns 8.5% with 5.3% in his hands and the remainder held by other banks, funds and management. There is a mighty financial engine beating under the hood of the business.

 

In fact, since CVC acquired F1 the teams have been paid a total of $3.7 billion in prize money which is nearly as much as the $4 billion that CVC has received from dividends and the sale of stakes in F1. If the dividends and share sales of the teams over the same period was included in their total along with the prize money there is no doubt that their haul would come to far more than CVC has made from F1. The teams really are the biggest winners.

 

true!

 

Until that day comes - if people are lining up, why not take their money?

 

The facts have been told on this forum before. Sheeple find it easier to point the finger at the pygmy though.

 

Yup. I just really hope that certain tracks (Spa, Monza, Suzuka) will remain for a long time to come. Simply the best.

 

Yes no worries, there is no harm done in realizing how the wheels of F1 actually turn..

 

Totally agree, a bit like believing Ham and Nico are now back to being best buddies..

 

Bernie makes for a convenient scapegoat, fabulously wealthy, looks like a grinch, the Boss.

What will F1 look like in a post-Berine, CVC Capital Partners era? I'm concerned it will become even more sanitized and specified.

-F