F1 owners say team contracts are not long enough


The High Court trial which has been engulfing Formula One for the past month may be coming to a close but there has been a steady stream of news in recent days. First it came to light that F1 nearly collapsed during the dispute with the teams in 2009. Then came another revelation from Donald Mackenzie, co-founder of CVC, the private equity firm which controls F1. As Pitpass' business editor Christian Sylt revealed on Saturday, Mackenzie accused the Royal Bank of Scotland of recklessly lending 1.6bn to F1. Now it has been revealed that his investors don't think the contracts with the teams are long enough.

It could signal an extension to the long-running negotiations with teams about signing the Concorde Agreement, the contract which commits them to race and confirms their commercial terms as well as F1's regulations.

Writing in the business newspaper CityAM, Sylt quotes Mackenzie saying "even now, after the latest contracts, which have been signed up to 2020, the first thing any new shareholder says to me: it's not enough. It's not enough 2020. Can't we make it a longer period? We don't want the uncertainty."

The Concorde expired at the end of last year and was replaced by separate commercial agreements with each team. These are the ones which run until the end of 2020 and although they bind the teams to F1 they do not give the sport stability as, unlike the Concorde, they do not confirm the regulations.

F1's regulations are determined by the FIA, which is a signatory to the Concorde. In September the FIA announced that "the framework for implementation of the Concorde Agreement for the period 2013 - 2020, has now come into force." However, although this has been agreed by the FIA, the teams have yet to sign the contract and an increase in its duration would most probably extend the negotiations.

Mackenzie's comments came in evidence given to the High Court last month in the trial which surrounds CVC's purchase of F1 in 2006. He was discussing the risks to F1 because the court case centres on the value of the sport.

The case has been brought by German media rights firm Constantin Medien which claims that F1's boss Bernie Ecclestone and his family trust paid a 26.8m ($44m) bribe to German banker Gerhard Gribkowsky in return for him steering the sale of F1 to CVC for 1.2bn ($2bn) in 2006. Constantin says that CVC was Ecclestone's preferred buyer as it had agreed to keep him in charge of F1. He denies this and says that Gribkowsky had threatened to make false allegations about him to the UK tax authorities if the money was not paid.

Although CVC was the highest bidder, Constantin claims that other buyers would have paid more and it is suing Ecclestone, Gribkowsky, Bambino and its former legal adviser for 85.6m ($140.4m) in damages. Neither CVC nor Mackenzie is a party to the claim.

He claimed in court that the short length of F1's contracts with the teams is the flaw with the argument that the sport was undervalued when CVC bought it.

The forerunner to the previous Concorde expired at the end of 2007 and Mackenzie said "even with us coming in and agreeing so many things with [the teams] they did not actually sign until 2009. And in that period between 2006, when we bought it, and 2009, we could not sell this company. It was not sellable. No one wants to buy Formula One when there's no Concorde agreement signed. It's just not marketable. If there's a team war going on, they run a mile. They're not interested."

He added that this "is the glaring problem with this whole thesis. In 2005, 2006 when we bought this business it was basically unsellable. It was the luckiest day in those bankers' lives when I walked through the door. They couldn't have sold it to anyone else. No one had the money, no one had the know-how and no one had, frankly, the balls to do such a risky deal."

Indeed, the very fact that he was saying this in a court case about F1 shows just how risky the sport can be.

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

Published: 02/12/2013
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