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Malone renews F1 pursuit

June 13, 2014

By Colin Mann

lewishamiltonFurther reports have emerged that John Malone’s Liberty Global and Discovery Communications are seeking to take a 49 per cent stake in Formula One Group from private equity player CVC Capital Partners. reported February 2014 that the pair were considering such a stake.

CVC owns some 35 per cent of F1, and any deal would likely value F1 at around $9 billion. CVC bought F1 in 2005-06 from its lenders, investing nearly $1 billion and using $2.5 billion of debt. Since then, CVC has returned more than five times its initial investment through the sales of shares to institutional investors in 2012 and dividends. The pair are understood to value the business nearer $8 billion.

Discovery recently took control of Eurosport, which holds the rights to a range of four and two-wheeled action at levels below motor racing’s premier series. Such a move would put Malone the other side of the table when it comes to negotiating sports rights.

Talks with CVC and Lehman Brothers Holdings, which owns 15.3 per cent, are said to be ongoing, with Liberty Global and Discovery wanting to pay about $4 billion for the stake. CVC, the London-based private-equity firm, and Lehman want about $500 million more for the stake, the people said.

CVC also is contemplating an initial public offering of Formula One, said the people, though that is unlikely before the resolution of a trial involving Chief Executive Officer Bernie Ecclestone.

Ecclestone said that Liberty and Discovery had approached CVC, although he didn’t know the details of the negotiations and didn’t anticipate becoming part of the discussions at a later date.

Ecclestone is currently on trial in Munich for allegedly paying a $44 million bribe to Gerhard Gribkowsky, the former chief risk officer of Bayerisches Landesbank. Ecclestone has said a possible IPO is on hold pending the outcome of the trial, which is scheduled to run until at least September.

Rupert Murdoch’s News Corp was considering taking control of F1 in spring 2011, at a time when German prosecutors had instigated an inquiry into the alleged bribe. CVC is thought to welcome an exit as a way out of the legal imbroglio.

At the time of the potential News Corp bid, Ecclestone warned Grand Prix teams that it would be “suicidal” for them if the sport moved to its subscription channels as part of a takeover deal.

Commenting in February, Ecclestone’s view had altered somewhat. “It depends what they want to do with it. If they want to control the sport through TV, it’s probably not good. But what sounded stupid a few years ago may not be stupid today. The world is changing so fast.”

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