SEPTEMBER 20, 1999
TAG raises more money
THE speculation that McLaren boss Ron Dennis and Mansour Ojjeh's TAG Group are planning to buy a substantial shareholding in Bernie Ecclestone's Formula One Holdings increased dramatically last week when it was announced that TAG is selling its remaining shareholding in the TAG Heuer watch company to France's Louis Vuitton Moet Hennessy. TAG owns 28.5% of the company and will raise around $210m from the sale. Another shareholder (believed to be Dennis) is selling 2% which will raise another $15m.
TAG and Dennis recently raised an estimated $320m when they sold 40% of the TAG/McLaren Group - which owns the McLaren F1 team - to DaimlerChrysler. This is believed to be the first part of a phased deal which will see the German car company take full control of the team by the year 2003, a transaction which could raise another $1bn for TAG and Dennis.
There is little doubt that the money being raised at the moment is for a bid to buy FOH. This may be a straight share purchase although Ecclestone is understood to be asking as much as $2.4bn to cede control of the company. Another route is for TAG and Dennis to purchase the $1.4bn Eurobond issue from German bank West LB and offer the bonds to Ecclestone in exchange for equity. This would be a very attractive deal to Bernie as he would save as much as $330m in interest payments. The rumors of other financial institutions being involved in the talks seem to be attempts to raise the price rather than serious bids.
Even with the sales of TAG Heuer and TAG McLaren Ojjeh and Dennis are still quite a way short of the money needed to acquire FOH and this may explain the involvement with McLaren of private equity company Doughty Hanson, which has been involved in recent TAG Heuer deals and specializes in raising money for high technology businesses at the top end of the market - which fits perfectly with the TAG McLaren investment strategy.
At the moment no-one involved is saying anything but we expect the talks to develop rapidly and there may even be an announcement about the future before the end of the year.
If TAG and Dennis do take over FOH we would expect it to be a phased deal to allow Ecclestone to run the business for a couple more years. This would give Dennis time to sort out the situation with McLaren, which he could not go on running if he were to take over FOH. It would also allow FIA President Max Mosley - who is not a Dennis fan - to get to the end of his term of office in October 2001. It remains to be seen who would take over at the FIA but one obvious choice would be Sweden's Lars Osterlind - who will be 56 in October 2001 - or Italy's Marco Piccinini.
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