NOVEMBER 23, 1998
A pot of gold for Eddie Jordan
EDDIE JORDAN has sold a percentage of his Formula 1 team to the venture capitalist firm Warburg, Pincus & Co. for what is rumored in the business world to be $60m. Jordan remains the major shareholder in the team although the high price paid by the company suggests that Eddie has sold at least 40% of the team. If the $60m figure is correct this would value Jordan Grand Prix at $150m, which is more than twice the price Honda was willing to pay for the team three months ago. Whatever the case everyone seems to be happy. The Jordan Family trust in the Channel Islands is loaded with cash; the team has money to invest in new facilities and technology and EJ remains in control.
Warburg, Pincus & Co. may have paid a high price for the shares in Jordan but the company is not short of money. It currently runs a $6bn investment portfolio with shareholdings in a wide variety of different businesses around the world, including TV stations, telecommunications (it owns a large part of US telephone firm LCI, a big CART sponsor), financial services and property.
It operates through a variety of different investment funds into which small investors contribute. These have a variety of different levels of risk. We understand that the Jordan investment will not be paying a dividend but will be used to produce a large lump sum at some point in the future when Warburg, Pincus & Co. decides to sell on the shares.
The two parties intend to work together to develop business around the team name. The obvious ideas being better merchandising operations and perhaps even the building of a Jordan road car. There is, however, some confusion between Eddie Jordan's comments and those of Warburg, Pincus & Co.'s Dominic Shorthouse. Jordan told racing reporters that there are no plans to float the team in the future while Shorthouse told financial journalists that a floatation was a possibility. Jordan is also rather contradictory on the subject of selling more shares. He said that he has no intention of further reducing his shareholding in the team but added that the deal does not mean that the team will not consider offers from car manufacturers.
The Warburg, Pincus & Co. deal is interesting in that it is the first foray into F1 of a big investment company. It has also provided an interesting insight into the funding of a modern F1 team, giving details of Jordan's financial situation. The team made a $7m profit in 1997 on a turnover of $60m and 60% of the team's income - around $36m - came from Benson╩&╩Hedges with the remainder coming from the TV income (around $15m) and the rest from smaller sponsors and from merchandising.
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