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FIA takes $120m stake in F1 earlier than expected

NEWS STORY
25/11/2014

It has been revealed that the FIA has a 1.06% stake in F1's parent company worth $120m

Writing for Forbes, Christian Sylt reveals that the latest filings for F1's parent company, Delta Topco, reveal that the FIA 45,819,734 ordinary shares (out of a total of 4,286,181,944) thereby giving it a 1.06% stake.

An IPO (Initial Public Offering) of Delta Topco was planned in 2012 but this was subsequently hatled following the Eurozone crisis and then legal battles involving the sport's supremo, Bernie Ecclestone, who had previously said that the FIA would get 1% if the the floatation went ahead.

Since then, the sport's major shareholder CVC has been looking to sell its 35% stake with Discovery Communications and media mogul John Malone’s Liberty Global looking to be the most likely buyers.

CVC bought F1 in a $2 billion leveraged buyout in 2005 and is already understood to have made $4.4 billion from its investment. This staggering amount is due to share sales and dividends, the most recent coming in the summer when Delta Topco increased its debt by $1 billion in order that the money could be paid to its owners. This resulted in $350m for CVC and the FIA’s 1% stake yielding $10m pro rata.

The FIA's income is usually made up of fees from motor sport's various series and their participants whilst its biggest outgoings are salaries and travel costs. In February the Daily Telegraph revealed that the FIA’s latest financial statements reveal a net loss of $3.4 million on revenue of $81.5 million in the year to 31 December 2012.

Ultimately, the FIA owns F1's commerrcial rights though since 2011 Delta Topco has had the licence to them, a deal which runs for 100 years. The FIA sold the licence in 2001 for $313.6 following an anti-trust investigation by the European Commission (EC) which claimed it was restricting competition by favoring F1.

The EC ruling that the commercial exploitation and governance of F1 must be completely separate, the FIA agreed to sell the rights for 100 years "in exchange of one-off fixed fee, payable at the outset".

This meant the FIA had no reason to favour F1 and when the EC subsequently closed the proceedings it issued a statement confirming that "the role of FIA will be limited to that of a sports regulator, with no commercial conflicts of interest." It added that "to prevent conflicts of interest, FIA has sold all its rights in the FIA Formula One World Championship."

Approved by the its own legal department, the FIA is confident the 1% stake in Delta Topco does not contravene the agreement. Nonetheless, when revealing the FIA's option earlier this year, the Guardian quoted a spokesperson for the EC as saying: "the Commission is monitoring market developments in the sport sector, including motor sports. This is all we have to say for the time being."

Chris Balfe

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1. Posted by gturner38, 27/11/2014 15:39

"RDFox, the big issue at hand with the FIA and F1 is that the FIA is not just about F1. They are the sanctioning body for most international motorsports series including indirectly NASCAR and Indycar. Those two organizations are part of ACCUS, which is the FIA's National Sporting Authority in the US. The issue the EC had with with the FIA was that it was perceived that the FIA was trying to use its influence over other series to the advantage of F1. A case in point was the FIA's change in engine regs for Group C. By switching from the fuel conservation regs that worked well for the series to requiring the same 3.5L normally aspirated engines F1 was using at the time, the FIA effectively killed manufacturer interest in prototype sportscars for a decade. The FIA then turned to the growing interest in CART internationally by threatening to refuse superlicenses to anyone that participated in an Indycar race outside of North America. While the NFL has an antitrust exemption, I'm not sure how long that would last if it blackballed players who went to Canada to play or played in a league like the USFL.

Forcing the sale of F1 and WRC commercial rights simply put those two series on even footing with the other international series that the FIA wasn't directly taking TV money from. As a practical matter, it was always Bernie making the TV deals, so nothing changed in that way apart from Bernie no longer being a VP in the FIA. "

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2. Posted by MKI, 26/11/2014 10:20

"Thanks RDFox! Can I suggest that the game first began to change significantly back in the 80's when the FIA's then President, M Balestre, agreed to allow F1 to be run essentially by the teams in one form or another. It worked well for the sport as a whole for a while with F1 leading the charge to generate revenue and world wide recognition. But it was an unusual set of circumstances - a young sport with a young governing body learning the ropes. One of the lessons both must have learned in the meantime is competitors are not ideal rule makers! The FIA, by divesting itself of its sporting authority and accepting an order to be similarly stripped of influence in commercial matters seems to be leading to an uncertain future."

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3. Posted by RDFox, 25/11/2014 21:49

"Much as it pains me to say it, the day that F1 as we knew it died was truly the day that the EC court ruled that FIA needed to divest itself of the commercial rights. No other sporting sanctioning body that I know of has ever done this. Indeed, over here in the States, most professional sports--and, indeed, many amateur (collegiate/university-level) sports--haven't even granted full control of the commercial rights to the sanctioning body, with the individual teams generally holding the regular-season commercial rights; only the postseason playoffs have their commercial rights centrally held. (This has certain levels of variation--the NFL holds the television rights to all its regular-season games, with the teams having control over only radio rights for the regular season and television rights to the preseason; collegiate-level football teams generally sign their regular-season television rights over to the conference they play in.)

The nearest equivalent to the F1 situation would probably be NASCAR, where the sanctioning body used to allow each track to negotiate its own broadcast deals, but which decided, as of 2001, to centralize television rights for all NASCAR Touring Series. (The track owners were mollified by a LARGE reduction in sanctioning fees to offset the lost revenue.) Even so, each track still has the right to negotiate its own radio broadcast and trackside advertising deals--and, indeed, professional sports leagues and sanctioning bodies have been granted antitrust exemptions under US law, so long as they limit their business to their sport and do not expand into other activities (for example, if the NFL were to attempt to purchase the National Hockey League, this would almost certainly get the NFL's antitrust exemption cancelled--something similar, involving expansion into non-telephone fields, was the cause of the early-80s breakup of the Bell Telephone monopoly, which was a legally sanctioned monopoly so long as AT&T didn't start getting into other businesses, like computers).

To be honest, it's quite possible that the only way to truly fix F1 would be if someone were to start an alternative, non-FIA championship using a formula based on F1 tradition, sanctioned by a new sanctioning body based in the United States (so that it would receive an antitrust exemption as a sports league, and not be subject to any attempt to repeat the EC court's decision with it), and getting at least Ferrari, Monza, Spa, Silverstone, and Monaco on board with it--the last simply because without those five parties, nobody would ever take an "alternative" championship seriously as F1. Unfortunately, doing this would require someone with Bill Gates-level wealth to found and fund it..."

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4. Posted by MKI, 25/11/2014 11:40

"It appears from this article that the relationship the FIA has with those who run F1 is certainly unusual. Every sporting governing body has duties; being an independent arbiter when required is surely one such. And yet it is clear the FIA was ordered to bow to a higher authority in matters of finance. Why? Has it been deemed necessary in other sports?"

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