Flotation set to value F1 at 7.9bn says CVC


Formula One is still digesting the recent rumours that the sport's boss Bernie Ecclestone is being charged in Germany for alleged bribery. However, anyone who thinks that this is going to stop F1 pressing ahead with its business plan is sorely mistaken.

An article in the Guardian by Pitpass' business editor Christian Sylt reveals that the private equity firm CVC, which controls F1, is still planning to proceed with the flotation of the sport on the Singapore Stock Exchange. That's not all. As Pitpass predicted in February, F1 is expected to be worth much more than the 6.6bn ($10bn) valuation which was originally proposed.

CVC originally hoped that the Initial Public Offering (IPO) of F1 would take place in June last year but it put the brakes on the plan due to the worsening financial climate. Instead, CVC cut its stake by around half through selling 28.4% of F1 for 1.4bn ($2.1bn) to money managers BlackRock, Waddell & Reed and Norges, the investment division of Norway's central bank.

A source close to CVC says that the private equity company "isn't planning to sell more stakes before the float. If you look at Discovery Channel and other comparables, the market is up 25% since we tried to IPO last year so just mathematically applying the new pricing for the company, it is worth 25% more. I certainly think you could shoot for 7.9bn ($12bn)."

As there are no other major floated sports rights management firms, F1 compares itself to media companies such as Nasdaq-listed business Discovery Communications. It runs the Discovery Channel and over the past year its shares have risen more than 50%.

"Sport businesses and content businesses are in significant demand and F1 is one of the very best," says the source adding that "I don't see why the IPO would not be on track for the next 12 months."

However, the road ahead is not clear. Ecclestone is embroiled in multiple law suits relating to a 29m ($44m) payment made by him and his family trust to German banker Gerhard Gribkowsky shortly after CVC bought F1 in 2006.

Gribkowsky was chief risk officer of German bank BayernLB which sold its 47.2% stake in F1 to CVC. German prosecutors believe that Ecclestone paid the money to Gribkowsky to steer the sale of F1 to CVC as it had agreed to retain him as the sport's boss. Ecclestone denies this and says that Gribkowsky threatened to make false allegations about his tax affairs to the Inland Revenue if the money was not paid. He told Sylt over lunch last week that "CVC are standing by me 100%."

In June last year a Munich court found Gribkowsky guilty of receiving a bribe and sentenced him to eight and a half years in prison. Media outlets in Germany recently claimed that Ecclestone has been charged with bribery but he says that the prosecutors haven't contacted him.

"I haven't got anything from them. I don't know what they are doing. At the moment I am a suspect with five other people. If they charge me with whatever presumably they will have to charge the other people. I hope they don't but I think they will. Then we will see what happens. That doesn't mean to say there will be a trial."

As Pitpass has already pointed out, under German criminal law, if someone is charged, a court has to decide whether to bring the case to a trial or proceedings could be dropped in exchange for a ‘non-penal payment.'

Ecclestone's German law firm Thomas Deckers Wehnert Elsner says that "the documents with the charges from the Munich prosecutor's office have not yet been received by the defence. Therefore, we cannot provide a statement. The defence sticks to its view that Mr Ecclestone has neither committed bribery nor played any part in committing a fiduciary breach of trust."

Ecclestone is also facing a civil suit in London's High Court from German media company Constantin Medien which claims that it lost out on a profit share agreement from the sale because F1 was in fact worth more than CVC paid.

"I think we need to clarify Bernie's situation in Germany and I think once that is clear the market would love an IPO," says the source adding that CVC has no plans to replace Ecclestone. However, this will have to be considered at some stage in future since he turns 83 this year.

F1 only has 313 staff and 10 senior management with no deputy or chief operating officer waiting to take over the driving seat. Ecclestone is responsible for all divisions of the company and all geographic areas rather than having separate bosses running them. He is absolutely F1's supremo and, by the looks of it, he is staying in the driving seat.

Article from Pitpass (http://www.pitpass.com):

Published: 19/05/2013
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