CVC’s Purchase: To Be Or Not To Be?
Written by George Katinger · December 4, 2005
Everyone concerned over the future of F1 was reasonably pleased with the purchase of the sport’s commercial rights by CVC, announced late in November. Come December it turns out the sale may not proceed as advertised!
pitpass.com: CVC’s F1 buyout facing problems?
grandprix.com: Bankers at play
The content of the two postings highlight the possible outcomes of the problem. No sale or a massive financial holdup by the two remaining banks, Lehman Brothers and J.P. Morgan.
The cause of the backlash is the alleged right of first refusal to buyout BayernLB Bank’s sale of the shares. Morgan and Lehman both assert the rights exist, and BayernLB sold the shares to CVC without extending the offer to the two minority share holders first. Do they want to own the commercial rights to the sport? Hell no! Do they want to give away their shares to CVC? Double hell no!!
What they recognize firstly is that CVC has offered them a buyout at substantially less per share than they offered BayernLB. So one strategy is to hold out for a premium price, under the threat of blowing up the entire deal. The other approach is not to sell at all. If CVC actually manages to increase the value of the sport by the two or three fold everyone expects, what will that do to the value of those shares if they are retained? You know it, they will also increase in value.
You can look for some financial hardball playing over the next few weeks, as all parties attempt to maximize their returns on this deal. The party I wouldn’t want to be is the one responsible for excercising the due diligence in researching all of the legal rights of the selling parties. Someone will not be having a happy holiday this year!
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In the event this all goes south, or ends up in the courts the GPMA could end up being a reality. Were CVC to fork out more cash to the two screaming banks, they can then hardly be expected to offer a greater share (60 %?) to the teams, CVC is not a bottomless pit finance. Jesus Christ!!! I knew F1 was awash with money but how many pigs can you fit at a trough.
There is a major difference between saying Bernie has “sold” his share & having the green in your bank account, this transaction may not as yet be complete, so there may well be one VERY ANGRY little commercial rights holder out there. At the same time, the two protesting banks, Bernie & CVC, could end up being the owners of the other half of a split F1, with the Auto Manufacturers saying “we’re out of here, see ya” Logic & common sense would suggest-with these high stakes-that a resolution will have to come very quickly, although logic & common sense are hardly synonymous with F1.
George, I fear you, marc & I may have to put our tin foil hats on before March 06.Happy holidays from Area 51, another Fosters?
I expect CVC to up the offer for the shares of Lehman and Morgan, to their mutual satisfaction. End of story.
I agree, however, having planned on one price & now having to raise their purchase price, this will surely alter the offer they put to the teams. The next question, do you just give the GPMA an increased stake in Alpha Prema or do you allow them to buy a piece of the equity? I’m leaning towards the later.