SEPTEMBER 26, 2000
Car makers to move on F1 this week
FIVE of the car companies involved in Grand Prix racing are expected later this week to make a bid to buy shares in the Bernie Ecclestone's Formula One group of companies. The firms involved are BMW, DaimlerChrysler, Fiat, Ford and Renault. Our sources say that an approach will be made under the guise of the Association des Constructeurs Europeens d'Automobiles, the European federation of car manufacturers. The ACEA is based in Brussels and represents the car companies when they need to work together. We understand that there has been a working group in discussion about the sale for the last three months and that this includes Luca di Montezemolo of Ferrari, Neil Ressler of Jaguar Racing, Jurgen Hubbert of Mercedes-Benz, Burkhard Goschel, the board member for research and development at BMW and Renault Sport's chairman Patrick Faure. It remains to be seen what they will propose but we have heard stories of a deal in which all the teams involved in Grand Prix racing buy a share in a company which will then acquire a shareholding in SLEC, the holding company of the Formula One group. By doing this the car manufacturers will be able to take more of the money being generated by the sale of the television rights in Formula 1. This will help them offset their investment in the business and give them more control over the sport.
The problem is that in order to buy 50% of SLEC they are going to need to raise around $2bn because Bernie Ecclestone and Thomas Haffa are both keen to make a profit on their investments over the years. Haffa is more likely to sell than Ecclestone as his plan to centralise all F1 merchandising has failed because several teams, notably Ferrari, are not interested in working together on merchandising. This is understandable as the teams are all aiming their products at different sectors of the maket. McLaren is committed to top-end merchandising only while Jordan and Ferrari have developed the mass market.
Haffa's investment in F1 now makes little sense and he has made it clear that he will sell most of his shares in the company if the price is right. He is under pressure from shareholders in his EM.TV empire who want the company to get out of racing and concentrate on the businesses it knows in the merchandising of cartoon characters.
The price being asked for teams to join the new company is believed to be something in the region of $150m. This is a great deal of money for most F1 operations but it is not impossible that a deal will be organised in which the smaller teams will be able to pay off the investment with future income if the big car firms agree to underwrite the plan.
Even if Ecclestone decides to sell his remaining 50% he is likely to stay on as chief executive of SLEC. He knows the business and had negotiated all the deals and so it would be foolish for the automobile makers to try to replace him immediately. Bernie, who turns 70 in a month, is keen to keep on working in the sport to ensure that the business he has created over the last 15 years does not fall apart in the hands of others.
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