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How the Financial Times was mesmerised by Bernie Ecclestone

NEWS STORY
20/03/2012

Over the past year it has been hard to avoid reading about the improper practices some media outlets have been engaging in to obtain news stories. The reports have mainly focused on Rupert Murdoch's News Corporation newspapers which have been accused of hacking into phones and paying the police to get news stories. F1 has now been dragged in to the discussion about dubious editorial activity.

On Saturday Sky News, which is ultimately controlled by News Corp, printed an article which quoted from a confidential preliminary agreement between the teams and the sport's boss Bernie Ecclestone. Whilst this isn't a criminal matter like hacking phones or bribing the police, it still led to a strong negative reaction from the teams.

However, instead of standing by it online, Sky News reportedly caved in to the teams and removed the piece after just four hours. This claim is made in the Financial Times, a newspaper which is not known for its F1 coverage but it is renowned for supposedly maintaining the highest editorial standards in every edition. It doesn't live up to this reputation.

By now the F1 world is well aware of the ground-breaking news which Pitpass predicted on Wednesday last week was on the horizon and would "be one of the most important changes to the commercial landscape of the sport in its history." This is of course the fact that F1's majority owner, the private equity firm CVC, is to float part of its stake on the stock market, most probably in Singapore as Pitpass' business editor Christian Sylt revealed back in November.

The news confirming the float did not arrive with a bang but instead it fizzled out as it was jammed in to the Sky News piece along with the details about the agreement with the teams. Once it was pulled from the internet it left a complete state of confusion over whether the news was accurate.

The details of the float were reported on the Sky News' website by its business editor Mark Kleinman who has a tendency to make predictions which don't come to pass in F1. He is the person who claimed that "it's far from inconceivable" that a contender to replace F1's boss Bernie Ecclestone would be David Campbell, the former boss of London's O2 Arena. This of course is the same David Campbell who recently left his job at the F1 Group.

Kleinman was also behind the 'exclusive' (he is renowned for overusing the word) news that F1 faced "being thrown into turmoil," by an internal investigation into payments made to its former chairman Gerhard Gribkowsky. Pitpass pointed out from the start that since the investigation was internal it was effectively a rubber-stamping exercise and, lo and behold, it ended up giving F1 a clean bill of health. Last year we also got an 'exclusive', replete with caveats, claiming that News Corp was planning to make a bid for F1, which still hasn't happened. This was followed by the 'news' that CVC was in talks with former M&S boss Stuart Rose about him becoming F1's chairman. This didn't happen either.

Given this track record it is no surprise that readers might have been sceptical when Kleinman's piece appeared on Saturday entitled 'Ferrari Poised For F1 Stake As CVC Plots $10bn Float'. Removing it made a laughing stock of Sky News and unfortunately reporting of the float greatly suffered as a result of this confusion and uncertainty. Testimony to this, there are several significant F1 news outlets which have still not written about it.

Kleinman's piece claims that Ferrari will get shares in the float and a seat on F1's board. This could well be true. However, something does not seem quite right. The piece goes into detail about the sums which will allegedly be paid to the teams by the F1 Group under the new agreement after the current one expires at the end of this year. The article says the teams will get "47.5 per cent of the adjusted earnings before interest, tax, depreciation and amortisation in each calendar year between 2013 and 2020." This seems hard to follow since the teams already get 50% of F1's adjusted earnings before interest, tax, depreciation. It is unlikely (though not impossible) that their share will decrease in the new deal.

Given that the article is about an early draft of the agreement, which is believed to run into hundreds of pages, the details could well change by the time that the final version is signed. If they do, this would fit into the pattern of some of Kleinman's previous exclusives but it doesn't mean that all the claims in the article must be flawed.

One claim which is understood to be bang on the money is the valuation of F1. Pitpass regulars will remember that two weeks ago Sylt broke the news that F1's second-largest shareholder, the now-bankrupt bank Lehman Brothers, has to cash in its 15.3% stake by the end of June 2014 and a flotation is of course a perfect opportunity to exit. His report said that Lehman can expect to make $1.5bn from its stake since F1 has a valuation of $10bn which just happens to be what Kleinman says it will float for. Sylt says that, for now at least, his lips are sealed as to how he knew two weeks ago that F1 is valued at $10bn and that a float is on the horizon.

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