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Revealing the real value of F1

NEWS STORY
14/10/2007

The precise value of the F1 commercial rights company has been revealed in a report by Pitpass contributors Christian Sylt and Caroline Reid in today's Independent newspaper. The latest company filings of F1's UK holding company Alpha Prema show that private equity firm CVC paid $1.7 billion for the F1 group last year - 70% higher than previously estimated.

Bambino, the family trust of F1's impresario Bernie Ecclestone netted $478 million from the sale putting the total amount it has raised from F1 at a staggering $4 billion.

The cash cow in the F1 Group is Formula One Administration (FOA) which holds the lucrative commercial rights to the sport. Alpha D2, the UK company which indirectly owns it reported turnover of $725 million for a nine-month period last year.

However, it doesn't look likely that the company will be making much cash to pay out annually in the foreseeable future. As Pitpass previously reported, Alpha D2 has huge overheads of $485 million and is paying a whopping $220 million in annual debt repayments on the $2.5 billion of loans used to buy F1. As a result profits fell from $313 million in 2005 to $6 million last year. Team payments are due to increase in future and Alpha D2's revenues won't be getting a boost from F1's trackside advertising or hospitality divisions since they are owned by a different group within the F1 empire. Those two businesses are believed to have cost CVC $350 million putting the total deal value at $2 billion.

The reality is that CVC has even more on the line than anyone previously estimated. To just make its money back it doesn't need to make a 'mere' billion it has to make two. And, as if that didn't sound tough enough, F1 also has to pay back $2.3 billion of debt.

Maximising revenues from big TV and race hosting deals is crucial to F1's survival so the business and sport have never been closer. One of the debt providers, US bank Lehman brothers, owns a stake in F1's ultimate holding company Delta Topco and, together with its counterpart JP Morgan, is thought to have a 20% stake. They sit alongside other shareholders including Bambino, CVC and Ecclestone himself who ironically is understood to have the smallest stake in the group.

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