Why BAT will not drop BAR

Jenson Button, Brazilian GP 2003

Jenson Button, Brazilian GP 2003 

 © The Cahier Archive

There are lots of stories circulating at the moment suggesting that British American Tobacco is going to drop BAR. This is highly unlikely. BAT wishes to go on promoting Lucky Strike for as long as possible in Formula 1 and it is believed that a contract is already in place until the end of tobacco sponsorship in 2006.

The company is a shareholder in the team and there is no reason why this would change.

"British American Tobacco could remain a shareholder in this business for ever more," says team boss David Richards. "It may just be that they see it as a solid investment. It might be that in the long term - in 10 years - they could recoup their losses by hanging on in there. I would very much like to see that being the case because they have been very honorable towards the situation to date. They may have to remove themselves as a sponsor in 2006 but that does not stop them continuing as an investor."

The reason that an early removal is not likely is because BAT would then have to write off a considerable sum of money. BAT bought Tyrrell for $35m in 1997. The latest BAR accounts, which date from November 2001, indicate that BAT has since then loaned the team a total of $153m and it also guarantees an overdraft facility of $18m. The actual value of the team, given the current economic situation, is considerably less than that and so a sale would mean that BAT would have to write off the debts. This would have a noticeable effect on the BAT balance sheet and that would not please investors.

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