FEBRUARY 21, 2000
Ecclestone sells to Hellman & Friedman
THE recent days have seen much confusion in Formula 1 circles about who was going to buy the available 37.5% of Bernie╩Ecclestone's Formula One Holdings, the company which has the rights to the commercial exploitation of Grand Prix racing. Last week we reported a possible deal with an American investment company called Friedman, Billings and Ramsay. This was not correct. A deal has however been done with another investment company called Hellman & Friedman which has agreed to pay $1bn for the stake in the company.
Hellman & Friedman has an outstanding investment record in the course of the last 16 years, having raised and managed $4.8bn. It is currently placing its fourth fund, worth $2.1bn. The company policy is to go into partnership with proven management teams and it is currently specializing in media-oriented service businesses. Established in 1984 by Warren╩Hellman and Tully Friedman, the business enjoyed immediate success with an investment in the Levi Strauss jean company and has since made considerable profit from the Young & Rubicam advertising agency. It also has a share of the Australian media company John Fairfax Holdings Ltd., which controls the Sydney Morning Herald, the Melbourne Age and the Australian╩Financial╩Review newspapers.
For the last two years the San Francisco-based company has been managed by Brian Powers, an American businessman who was managing-director of the Jardine Matheson empire in Hong Kong before heading Kerry Packer's vast Publishing and Broadcasting company in Australia. He joined Fairfax in 1998 and soon afterwards moved back to the United States, splitting his time between Fairfax and Hellman & Friedman.
Powers visited the British Grand Prix last year in the company of Australian Grand Prix boss Ron Walker. This led to speculation that Fairfax might be interested in becoming involved in F1.
The deal values Ecclestone's company at $2.6bn. Bernie will remain in control as his family trusts still own 50% of the company.
The failure of Morgan Grenfell to take up its option to buy the shares seems to have been caused by opposition from parent company Deutsche Bank to the Formula 1 involvement as MGPE's initial investment in the Arrows team has not been a great success. There do not appear to have been any shortage of buyers for shares in Formula One Holdings with at least seven potential investors identified by sources in the financial world. Interestingly, these are said to have included Mansour Ojjeh of TAG, the Benetton Family's investment company 21 Investimenti and Ferrari sponsor Lawrence Stroll, who runs the Tommy╩Hilfiger company.
Other bidders mentioned are the Bronfman Family, which controls the Canadian entertainment and drinks group Seagram (which is involved in F1 with Williams, through its subsidiary Universal). In addition Germany's Leo Kirch and Thomas Haffa (of EM TV) were mentioned as was Iraqi property tycoon Robert Tchenguiz.
Hellman & Friedman will have two members on the board of directors of Formula One Holdings, with Powers expected to be one of them. The company will probably keep a percentage of FOH when the company is floated.
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