JANUARY 18, 1999
New owners for Arrows
THE Arrows Formula 1 team has been sold to a new consortium in a deal which is worth around $175m. It seems that most of this money has gone to the team's founders Jackie Oliver and Alan Rees who have remained the owners of the team's shares in recent years but had leased the majority shareholding to Tom Walkinshaw and his associate Peter Darnbrough.
Oliver and Rees established the team in November 1977 with three colleagues but the other investors sold their shareholdings within a matter of years. Oliver and Rees leased the team to Footwork in the early 1990s but later took control again. According to our sources Oliver and Rees have now agreed to sell the team once and for all, rather than to continue leasing the shares as in the past.
According to the team announcement Walkinshaw will own 25% of the new company and will be the chairman. Five percent of the shares are to be owned by the Arrows employees which means that the remaining 70% belong to a British-based Nigerian prince named Malik Ado Ibrahim and to the investment company Morgan Grenfell Private Equity Ltd., a subsidiary of Deutsche Bank. It is not clear which has the bigger stake in the team but sources in the business world suggest that the investment company is unlikely to want control of the team. It is therefore logical to assume that Prince Malik and Walkinshaw will between them control a majority of the shares, while MGPE may be the largest shareholder.
Very little is known about Prince Malik but the team press release says that he was involved in the sale of Lotus to Proton, is heavily involved in the telecommunication business and has had extensive dealings with Mitsui and Arcadia. His business interests are overseen by the London solicitors Mishcon de Reya.
The involvement of Morgan Grenfell underlines the current trend in F1 for teams to sell shares to venture capitalists which are looking for a quick return on their investment and see the current financial situation in Grand Prix racing being very favorable.
The deal is believed to include both the Arrows team and its subsidiary Grand Prix Racing Engines, which was formerly owned by Brian Hart. The announcement is bad news for the Zakspeed team which had been hoping to put together a deal to take over the team.
Arrows now needs to find substantial sponsorship in order to make the necessary investment for the future. The team is stuck with much the same package as it had last year and there have been a lot of staff departing in recent months. Despite this there are still 168 employees at Leafield with Mike Coughlan now technical director; Gordon Message in charge of operations and John Walton running the team. Coughlan had been in talks with Honda but it seems that he has now decided to stay with Arrows.
Most of the Arrows debts - rumored to be around $20m - are expected to be paid off as part of the deal but we hear that there is legal action going on between Walkinshaw and former driver Pedro Diniz, the Scotsman claiming $7m because the Brazilian broke his contract by leaving the team to join Sauber. We understand that Diniz was under contract for 1999 but that there were performance clauses in the deal which he says Arrows failed to meet.
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