F1

Docs Show F1 Preparing Plans For Post-Ecclestone Era, Upcoming IPO

Published May 30, 2012

F1 in a 487-page prospectus to be sent to potential investors ahead of next month’s planned IPO acknowledges the loss of Chair Bernie Ecclestone “could have a ‘material adverse effect on our business and results,’” according to Pignal & Blitz of the FINANCIAL TIMES. The prospectus also alludes for the first time to a "post-Ecclestone era for F1: a succession plan crafted with headhunter Egon Zehnder that includes a contingency arrangement involving pre-identified candidates drawn from the top of large global businesses who are on standby to take over at a moment’s notice.” Sources close to the stock flotation plans said that investor CVC is “now drawing back from its active oversight of F1 and will eventually sell down its remaining F1 stake in tranches.” Pignal & Blitz noted F1 is highly profitable as it generated $451M of operating profit on revenues of $1.5B in '11, "mainly through television rights, payments from race organisers and sponsorship.” Meanwhile, capital investments “were negligible, and running costs are low: much of the marketing is done by the sponsors themselves.” More unpredictably for investors, F1 is “a fragile ecosystem that periodically threatens to break down.” The most “fragile relationship traditionally has been with the dozen or so teams,” which every few years “threaten to create their own breakaway series.” The strategy has worked as payments to teams have “swelled rapidly to $700M as the F1 pie has grown.” Pignal & Blitz wrote, “Even with the shift in revenue sharing, not all teams are happy. Four out of 12 teams competing in the current season have yet to sign up beyond the end of the year” (FINANCIAL TIMES, 5/26).

DEALS ON WHEELS: In N.Y., Brad Spurgeon noted F1 tire supplier Pirelli has “the luxury of creating tires with no competition, but it has the new problem of trying to please the teams, drivers and spectators.” Red Bull team principal Christian Horner said, “The problem is that they have 12 teams asking for 12 different things, and you will never have a product that satisfies everyone’s request.” Toro Rosso Technical Dir Giorgio Ascanelli said that the tire question had “indeed returned an importance to the job of the driver in an age when so much is controlled or analyzed by computers” (N.Y. TIMES, 5/27).