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Plans to float Formula One may finally getthe green light in the coming weeks, a proposed listing in Singapore givinginvestors a chance to buy a chunk of the business behind the high-speed motorracing tour, writes Keith Weir.
The idea of floating Formula One has beenaround for more than a decade but there appears to be real momentum on thisoccasion to sell off as much as 30 per cent of the company.
Banks UBS and Goldman Sachs have been hiredto lead an initial public offering that could value the business at up to $10billion.
Peter Brabeck, the chairman of Swiss foodgroup Nestle, has been lined up to chair the company should the flotationproceed.
The driving force is private equity firmCVC Capital Partners which has owned 63.4 per cent of the business since 2006and now plans to cash in. CVC is seeking to cut its stake to under 50 per cent,a source close to the deal has said.
Further impetus could be provided by a 15per cent stake which was held by US investment bank Lehman Brothers when itcollapsed in 2008. A flotation would allow the bank’s administrators to raiseup to $1.5 billion for creditors.
Formula One is something of a paradox as abusiness. Its 20 races are watched by more than 500 million TV viewers, butdetails of its finances are harder to access.
Formula One chief Bernie Ecclestone made apresentation to bank analysts last week at London’s plush Savoy Hotel andfurther financial details are expected to be published in coming weeks as partof efforts to woo investors.
Revenue for the current season will reach$2 billion for the first time, according to a report by industry monitorFormula Money.
Fees paid by tracks around the world suchas Bahrain International Circuit to host races that bring glamour and exposureto countries are the largest part of that income at an estimated $700 million,exceeding TV income.
Based in London and run by the 81-year-oldEcclestone, Formula One has only around 250-300 staff. It does not own its owncircuits and it costs teams such as Red Bull, Ferrari and McLaren upwards of$100 million per season to compete in its races around the globe.
What Formula One Group does have arecommercial rights to the sport for the next 98 years and a brand that theBritish F1 supremo has built up over the last four decades.
Potential investors are also likely topress the company on a succession plan for Ecclestone, who has made his fortunefrom the business and retains a stake of over five per cent.
The planned listing in Singapore is anattempt to tap into Asian appetite for prestige brands and growing enthusiasmfor Formula One racing in the region.
English soccer champions Manchester Unitedalso looked at listing in Singapore before putting the plan on hold because ofvolatile markets last year.
“I think it is fair to say that people arequite excited about this IPO because I think the numbers are quite good,” saidan investment banker based in Singapore who is not involved with the deal.
“Of course, it has to compete withManchester United, but MU has withered down and this appears to be moving fullsteam ahead,” he added. “If you look at the business model, it is a veryexclusive concession that they have.”
