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Next week marks the start of the biggest commercial change in the history of Formula One. It may sound like a lofty claim to make but it is no exaggeration and you read it here first. Back on 14 March, Pitpass reported that this change was coming and it all gets going soon. Writing in the Telegraph today, Pitpass' business editor Christian Sylt reveals that next week F1's boss Bernie Ecclestone will be officially lodging the prospectus to float up to 30% of his business on the Singapore stock exchange. It is an essential part of the flotation process and marks the point that it officially gets off the grid.
Once the prospectus has been lodged it will be reviewed by the Singapore exchange over a period of between four to eight weeks. During that time research analysts working for investment banks will write reports about their forecasts and opinions of F1's strengths and weaknesses. Once the F1 Group's board has rubber stamped the plan to float, the analysts will go on the road for around two weeks to warm up investors.
The board could decide against proceeding but, as Pitpass has previously reported, that seems unlikely to happen. Likewise, right up to the moment before the F1 stock is listed, CVC, the private equity firm which owns the majority of F1, could put the brakes on the float if it believes the price offered by investors is insufficient. A partial flotation of Manchester United on the Singapore exchange was dropped due to lack of interest last year but F1 seems to have much more support and is expected to be valued at £6.1bn ($10bn).
Earlier this week CVC and Ecclestone gave an eye-popping presentation about F1's finances to a group of leading media analysts at London's Savoy hotel. According to several analysts who were in attendance, it revealed that few other media businesses have as much financial visibility as F1. Sylt explains why.
The prospectus contains a breakdown of F1's finances to the end of December 2011 but this isn't the really interesting news. F1's turnover in 2011 of £950m (€1.169bn) is stated on CVC's website and the breakdown of it by region and source follows the model given by Pitpass in forecasts from 2012 to 2016. The BBC has given a similar breakdown of F1's revenues, profits and costs from 2006 to 2010 so these kind of numbers are nothing new.
However, the most surprising information to come out of the presentation is, as Sylt reveals, that F1 has £4.4bn ($7.1bn) of revenue already committed to it. This means that, without lifting a finger, Ecclestone can be sure that £4.4bn will be flowing into F1's coffers. It is down to Ecclestone's business genius.
It is ironic that F1 is generally being assessed by media analysts since television rights sales do not comprise the biggest component of the revenues of the business. However, as one analyst reminded Sylt, there are no other floated sports rights holders which is a tremendous selling point since it makes the business unique and means that, unlike sports floated teams, it does not compete with direct rivals. The downside is that since there are no similar companies to F1 it is hard to put it in a pigeon hole. Media analysts are quickly having to learn the ropes about F1 even though the real engine behind the business is race hosting fees.
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