June 24, 2024

Motorsports: News Corp. Considering Bid for Formula One

PARIS — An announcement that the media giant News Corp. and the Agnelli family of Italy are considering bidding for control of Formula One auto racing has fired the starting gun for potentially complex and protracted negotiations over the future organization of the sport.

The two went public with a joint statement, saying they were “in the early stages of exploring the possibility of creating a consortium” to buy Formula One from CVC Capital Partners, a private equity firm based in London.

Such a bid, analysts said Thursday, would prompt close scrutiny from regulators, as well as raising questions among broadcasters, Formula One team owners and sponsors. A takeover would give companies with important vested interests ownership of Formula One, ending the current arm’s-length relationships among these players.

Exor, the Agnelli holding company, is the indirect owner of Ferrari, the most prestigious team in Formula One, a potential concern for rival team owners.

Meanwhile, News Corp. is a major television company in many of Formula One’s biggest markets in Europe and Asia. But it mostly operates pay-TV systems, while Formula One participants have pledged to appear on free television, where sponsors can reach the largest audiences.

“I can’t see how they could take over without changing fundamentally how the sport is run,” Nigel Currie, director of BrandRapport, a sponsorship agency in England, said Thursday. “The whole basis of sport is that there is a rights holder who sorts out the broadcasting deals, the sponsorships, the merchandising, everything else associated with it.”

CVC is sending out the message that Formula One could be sold, but only if the price is right.

“The ‘for sale’ sign is not being deliberately hung out,” said a person with knowledge of the approach who was not permitted to speak publicly, “but no one’s shutting the door in their face, either.”

In its own carefully worded statement, CVC confirmed the approach and recognized the “quality” of the two potential investors. It added: “Any investment in Formula One will require CVC’s agreement and will need to demonstrate that it is in the interest of the sport and its stakeholders, taken as a whole.”

Joe Saward, a blogger and journalist who has followed motor racing for 27 years thought the message was clear.

“Let’s face it, the sport is for sale,” he said. “It is just a question of someone coming up with the right price to send CVC away.”

CVC paid an estimated £1.8 billion, or $3 billion, to buy its majority stake in 2006 from Bernie Ecclestone, Bayerische Landesbank and J.P. Morgan. Mr. Ecclestone retains a minority share and is chief executive of Formula One.

That deal was approved by the European Commission, subject to CVC’s divesting its interest in Dorna Sports, which held commercial rights for the world motorcycling championship MotoGP.

Neither side has placed a current value on the rights.

News Corp. and Exor are in contact with a range of other potential investors, including banks, to join their bid. By involving others, they might be looking to pre-empt regulatory concerns.

“They would not have a problem raising the money,” said a person who has worked on the Italian end of the bid. “Quite a lot of work’s already been done on this.”

Formula One’s lucrative broadcast rights fall under what is known as the Concorde Agreement, a commercial arrangement involving the racing teams, CVC and the governing body of auto racing, the Fédération Internationale de l’Automobile. The details of the deal were not made public.

This deal stipulates that in countries with the biggest audiences, free-to-air television stations must hold broadcast rights. That agreement runs out at the end of 2012, and the signatories are in the process of negotiating a new one.

In Britain, for example, the BBC has the broadcasting rights and television companies controlled by News Corp. are not currently free-to-air. In France, a free, commercial broadcaster, TF1, holds the live race rights.

News reports indicated that representatives from Ferrari, Red Bull, McLaren and Mercedes would meet May 14 in Stuttgart for talks on the sport.

“We are not directly involved at the moment,” Ferrari said in a statement on its Web site. “Ferrari stresses the importance of ensuring the long-term stability and development of Formula One.”

The possible bid was the brainchild of James Murdoch, chief executive of News Corp.’s international operations, and John Elkann, who runs Exor, the holding company of the Agnelli family. The two have known each other for some years and have a good relationship, according two people who have worked on the deal.

Exor owns 30.5 percent of Fiat, which in turn owns Ferrari. Last year, Mr. Elkann was confirmed as Fiat’s chairman. He is the grandson of the former chairman and patriarch of the Italian family, Giovanni Agnelli, who died in 2003.

Exor also has significant holdings in a range of companies in financial services, real estate, component makers and paper, as well as 60 percent of the Juventus soccer team in Turin.

Eric Pfanner contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=7647e89da2130c3758d9b0dfe971dac6

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