MAY 26, 1997
Will the Concorde Agreement be scrapped?
AS Bernie Ecclestone ties up the final details for the sale of shares in his company Formula 1 Holdings Ltd., there were suggestions in Barcelona that there could be revolutionary changes ahead for the organization of Grand Prix racing - including what could lead to a replacement of the Concorde Agreement with a longer-term tripartite contract between F1 Holdings Ltd., the FIA and the F1 teams.
The sale of the shares will not actually be a flotation but rather what is known as "a placement" with financial institutions - rather than individual investors - buying the shares and then deciding whether to sell them on to the general public if they think there is suitable demand. As such all Ecclestone has to do is convince the financial institutions that he has a sound business - and he appears to have been successful in this.
Ecclestone told financial analysts last week that 50% of the equity will be sold. He and his family will retain 30% and the FIA will receive 10% - probably in exchange for an extension of the current deal under which Bernie controls the commercial rights in F1. This is currently for a 15 year period but may be extended to cover the next 25 years.
The remaining 10% will be allocated to the teams and promoters. Some of the F1 team bosses - notably McLaren's Ron Dennis - say that they deserve more money as without them Ecclestone would never have been able to build up the F1 show. This is a to a large extent a valid argument but, despite the complaints, the teams do not seem to have any claim on F1 Holdings Ltd. - which Ecclestone and his family own.
Wilder elements in the paddock have been trying to promote the idea that a rival World Championship could be established by the teams without Ecclestone but there is very little substance in these arguments. It should perhaps be pointed that a one percent shareholding in F1 could be worth as much as $35m and most of the F1 teams would be quite happy to settle for that.
The 1997-2001 Concorde Agreement has been signed by seven teams: Arrows, Benetton, Ferrari, Jordan, Ligier, Minardi and Sauber. Williams, McLaren and Tyrrell continue to refuse to agree terms with the signatory teams while Stewart Grand Prix is currently outside the entire arrangement. Bernie wants to end the disputes and put together a solid package for the longest possible duration, involving at least 10 teams.
The teams all agree that floating the business is a good idea for the long-term stability of the sport but think that they should be getting more money from the TV income and more shares in the business. While some are trying to stir up doubts about the sale in the City of London, others are concluding that a new form of contract would be the best way to go forward and that if Ecclestone is willing to offer more, they will be willing to commit themselves for a longer period of time.
Ecclestone and the Salomon Brothers investment bank have been playing down such issues and have been bolstering confidence by revealing an impressive management team which will run the Formula 1 plc once the company is sold.
Ecclestone will stay on as chief executive with German Helmut Werner as the company chairman. Werner was chairman of Mercedes-Benz between 1993-97 but was recently ousted by Jurgen Schrempp, his rival for the job of chairman of Daimler-Benz. Werner is a much respected businessman and is expected to play an active role in expanding the F1 business.
Deputy chief executive would be Italian Marco Piccinini, who was Ferrari's sporting director between 1978 and 1988 and is still on the board of Ferrari. In recent years he has concentrated on running the Principe Societe de Banque de Monaco, a bank run by his family, with which Ferrari had extensive dealings. Piccinini's involvement is quite clearly a way to keep Ferrari happy.
The finance director of Formula 1 PLC will be David Wilson, who comes to F1 from a background in accountancy with Ernst & Young and with the Ladbroke leisure group.
Among the non-executive directors will be Rob Rowley, who is currently finance director of the news agency Reuters, and Walter Thoma, who is currently in charge of Philip Morris Europe but who retires in June.
This team is expected to continue to expand F1 as a global business increasing not only the income from TV rights but also diversifying into merchandising, which may include such things as F1 themed restaurants and memorabilia shops. At the presentation last week financial analysts were told that income is expected to triple in the next couple of years as pay-per-view television expands and more races are added to the F1 calendar.
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