News and views on motorsports

Thursday, December 08, 2005

CVC And Williams

CVC Capital Partners, with investments in Kwik Fit, The Automotive Assosication, Dorna and a host of other manufacturing, media businesses among others, have now acquired around 85% of the shares (up to last week when JP Morgan also sold out)in SLEC. And thus, through some complicated shareholding structure, controls the commercial rights to Formula 1.

Bernie sold his remaining shares in SLEC to CVC or more specifically Alpha Prema, the company that now holds the SLEC shares. In turn he's used the proceeds to buy into Alpha Prema. Bernie also retains excutive control over the sport. Beyond their investments, little is known about CVC. Apparently, even the investigative resources of UK's The Times unable to break through the veil of secrecy. Truly a "private" equity firm and perfect for one such as Bernie who values discretion.

Heck, to be honest, if I were a billionaire tycoon, this is the route I'd go down as well. Not for me the American style stock market listing with its attendent weight and constant public glare into my financial affairs.

Interesting to see the timeline of the buyout.

24/07/2005 : Hutchinson Whampoa linked to Formula 1 buyout. This was quickly dismissed by Bernie. With all due respect to mega tycoon Li Ka Shing, I doubt if Bernie would have really wanted Chinamen to run Formula 1. Excellent businessmen of course the Chinese but I think a little too calculative and naive about the success factors of the sport. Rather like the banks you might say. And you know about dealing with the teams right? It takes a certain touch to it which Li may not understand. And moreover, the teams may not understand him. Its a culture thing.

30/08/2005 : Some speculate that the teams were involved with in a USD 1.5 billion bid for Formula 1.

31/08/2005 : Bernie says F1 is "not for sale," in this article in amid speculation that Formula 1 is to be flogged off for a billion bucks. Yet another denial this year that eventually was proven to be true!

17/10/2005 : Bernie says he'd like Formula 1 to be publicly sold. Well, in the future it just might given CVC's modus operandi of first acquiring companies and then flogging them off at a profit.

1/11/2005: Bayerische Landesbank, who together with Bernie eventually sold the first tranch of shares to CVC, urges peace in our time. Perhaps to sweeten the deal?

18/11/2005 : Jean Todt, John Howett of Toyota, Nick Fry and Bernie allie, Flavio Briatore meets up with Bernie Ecclestone in Monaco to discuss the future of Grand Prix Racing. The Pitpass article here indicates its not about Bernie or even more money The major point of contention is that the manufacturers are simply not happy about the sport's governance by the FIA. Perhaps to allay CVC's fears regarding the breakup of Formula 1 as we know it. If Toyota, Honda and Renault are still willing to jump in with Bernie then all is not lost.

25/11/2005 : Bayerische Landesbank and Bernie sell their shares to Alpha Prema, the controlling company owned by CVC.

6/12/2005: Despite some resistance, JP Morgan sells off their shares to Alpha Prema.

Now, a couple of weeks after the CVC announcement, Frank Williams has just signed up to the 2008-2012 Concorde Agreement effectively siding with the FIA/FOM Establishment and joins Midland, the two Red Bull teams and of course Ferrari.

I'm speculating that the CVC deal and Frank's agreement are related. Make no mistake, now with BMW gone and with them free engines and cash and the exit of title sponsor HP, Williams are strapped for cash. Witness their recent massive car boot sale and the fact that they're considering Narain Karthikeyan as a pay driver for testing. For testing???!!! I'd heard of rent a car drivers who got to race but this bloke is paying for the privilege to test!

So the coffers being less that what is was in previous years, Frank and Patrick has had very little choice but to agree with Bernie and sign up to the Concorde. As Frank said in February, he couldn't afford to be too hard nosed about it because unlike Ron Dennis at McLaren, racing is all he's got.

This is an interesting point. All the GPMA members have got other activities besides racing. They're all in the car manufacturing business. Even McLaren's got other businesses aside racing and its profitable as well. Witness the results of their latest financial statements. They've made some good profit. All the GPMA folks can afford to play hard ball.

Williams' predicament is rather like Ferrari's. Lets not forget that Ferrari are in fact also a "manufacturer" backed team. In its case, its backed by Fiat who effectively bankroll the Formula 1 operation. Some of Fiat's bankers might be unhappy with this and with Luca di Montezemolo for splashing cash they don't have to Ferrari but the Agnelli family that controls Fiat have secured Luca's future there. But, Luca is no fool and Fiat cannot afford to throw money at Ferrari's Formula 1 team they way its done in the past. And so, they did a deal with Bernie to secure more for themselves.

This is precisely what Frank has done for Williams. As Patrick Faure of Renault said last week, Formula 1 stands on the brink. Its future will be decided in the coming weeks.

A major team in Williams has decided to go with Bernie. I think Toyota and Honda actually want to go with Bernie if only the issue of governance and especially rule stability can be resolved. I think the Japanese are very pragmatic and they know what they're in Formula 1 for. Marketing and a way of challenging their young engineers. Screw the money they don't really need it. They're both highly profitable companies. But the FIA is driving them beserk with all these rules changes.

Renault are in a very interesting predicament. Boss Faure sides with the GPMA. Team principal Flavio is Bernie's mate. But CEO Carlos Ghosn, many think will want out of Formula 1 totally by 2008. The current Enstone and Viry operations could be flogged off. In which case, it would make sense for the next (private?) buyer to want to side with Bernie as well. They too, just might sign for Bernie if they can be assured that the FIA will behave themselves. More thoughts and opinions on

Mercedes and BMW are the only ones left then. But I doubt if BMW had planned to invest in a team competing in a two team championship.

I think with Williams on Bernie's side, the GPMA members will follow suit eventually. I think the only reassuarance they need is that Bernie will do something about his joined at the hip buddy Max. To that end it seems that the FIA have revamped the Court of Appeal, perhaps as a response to repeated public and team opinions that it is well and truly a biased kangaroo court. Asides that and commenting about CDG wings, Max has been rather silent about the whole CVC and Williams issue.

In the final analysis I have only a couple of things to say. First, they may be about peace and compromise at this moment in time but you can bet come 2010 or whenever they talk about extending the Concorde, there will still be more arguments and I can just bet we'll all be here again at that time.

Secondly, if the teams and manufacturers can agree then that's great because there's going to be only one Formula 1 and its something I've followed for the last 22 years and would be sad to see it go. However, I'd hate it if those prima donnas at Ferrari are once again given special treatment either in financial or political terms that result in an unfair advantage on the race track. If its equal treatment to all teams big and small then fine. But to offer Ferrari more financial rewards even if they come in last in the world championship is just bullshit.

The GPMA is (was?) a good way of fighting for a more equitable championship. If they can achieve that without a breakaway championship then all the better. I hope we see the end to the FIA and Bernie being Ferrari's stooges. If Max goes or changes his silly tune then all the better.

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