Stage set for a new Concorde Agreement

The agreements made in Paris yesterday between the FIA, the Formula 1 teams and the Grand Prix Manufacturers' Association have moved the sport a little further towards a final settlement that will lay the foundations for the next Concorde Agreement. There are still things that must be sorted out and we will hear more on December 15 when the final engine rules will be fixed. There will have to be more months of negotiation but with a commercial settlement completed and a regulatory deal done, the next step is a full and binding contract of those involved. The owners of the sport CVC Capital Partners wants a deal done so that it can get on with refinancing the purchase in whichever way it chooses to go. There are suggestions that the appointment of Peter Brabeck-Letmathe and Sir Martin Sorrell to the board of the holding company of the Formula One empire is a clear sign that CVC is planning a stock market flotation. This is not necessarily in the best interests of the sport but it would suit CVC as it would get its money out of the business and make a decent profit. The option would be a bond issue which would get less money but would leave CVC in control of the sport so that it could collect profits over a longer period of time.

Floating racing companies is not necessarily a good idea as investors tend to care only about money and not about the racing. The best example of how not to do is Championship Auto Racing Teams (CART) which ran Indycar racing from 1981 to 1994 with much success. In 1994, however Tony George announced that was going to set up his own series as his ideas were being ignored by fellow board members. In December 1997 CART announced that it was going to float on the New York Stock Exchange with a share price of $16. That rose to a high of $18 and continued in that price bracket despite the fact that the company proved to be difficult to run. In June 2000 the chief executive Andrew Craig was ousted and replaced by Bobby Rahal for a few months before Joseph Heitzler was appointed in December that year. A year later Heitzler was dropped after complaints from major shareholders about the way the business was being run. Finally the company was handed over to Chris Pook who reckoned that the structure was completely wrong and needed changing. By then confidence in the company had collapsed and CART ran out of money before Pook's changes could bear fruit and had to file for Chapter 11 bankruptcy in December 2003 after losing nearly $78m that year. The result was the purchase of most of the assets and the establishment of Champ Car, although its progress has been slow.

In recent months CART's shareholders have agreed to dissolve the company. They will receive 29 cents a share.

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