Features - Financial
MARCH 1, 1999
Who owns the Formula One teams?
BY JOE SAWARD
Grand Prix racing is becoming more and more of a business with confidence in the financial world gradually increasing as F1's revenues climb and the political battles of recent years subside. In recent months there have been some significant investments made in teams and we expect more in the years ahead - not only from investment banks and venture capitalists but also from major motor manufacturers.
But who owns what at the moment. And who are the really powerful players in each team?
We dug out the details.
McLaren International is the Formula 1 team belonging to the high-technology TAG McLaren Group. This now has six different divisions including a groundbreaking electronics subsidiary; a marketing company, a car stereo unit and, of course, McLaren Cars which built the amazing McLaren F1 supercar - and is currently working on the design of a new machine.
The group, which is run - and 40%-owned by Ron Dennis - is actually controlled by a Luxembourg-based company called Techniques Avant Garde SA. This is owned by Mansour Ojjeh and his brother Aziz and has global assets of around $700m.
Ojjeh has been a big fan of F1 since he became a sponsor of Williams in 1979. In 1982 he switched his support to McLaren and spent an estimated $5m to pay Porsche to design and build TAG turbo engines for Grand Prix racing. At the end of 1984 Ojjeh bought 60% of the McLaren company, which has expanded into the group. At the same time TAG also bought the struggling watch company Heuer and turned it into a successful business.
TAG is also involved in selling and leasing executive jets through its TAG Aeronautics subsidiary, which is a market leader in Europe and the Middle East, while there are is also considerable TAG investment in agriculture, property development and banking. In recent days there have been suggestions that Daimler-Benz may be interested in acquiring the TAG/McLaren Group from the Ojjehs.
The legendary Enzo Ferrari first established Scuderia Ferrari in 1929 and although the team changed names on several occasions it remained much the same for the next 40 years, during which time the company became the most successful racing team in history. After World War II Ferrari began building expensive road cars for the rich and famous. Racing and Ferrari's unusual personality added the company's mystique and created a glamorous image which would eventually make the Ferrari Prancing Horse one of the most recognized brand images in the world.
In the late 1960s Ferrari wanted to expand production of his road cars and needed financial backing. He sold 50% of the company to the Turin-based industrial giant Fiat. The Ferrari F1 team was left to run independently.
As part of the deal Ferrari agreed that when he died Fiat would be given control of all but 10% of the company. The remaining shares were inherited by Ferrari's son Piero Lardi Ferrari. Ferrari died in August 1988 and Fiat then took control. Fiat is a public company but the Agnelli Family still controls around 32% of the shares.
There have long been suggestions that Ferrari may eventually be floated on the stock exchange and become an independent company again. The first step towards that came in 1996 when Fiat sold three percent of its Ferrari shares to a consortium of banks for $14.7m. So today Fiat owns 87% of the business.
Frank Williams retired from driving at the end of 1966 and founded Frank Williams Racing Cars with the aim of buying and selling competition cars and spares. In October 1967 he entered a customer F2 Brabham for his friend Piers Courage for a race at Brands Hatch and by 1969 was running Courage in a customer Brabham BT26 in F1. In 1970 he formed a partnership with Alessandro de Tomaso in 1970 but it collapsed after Courage was killed. Williams then ran customer March cars until 1972 when he built the Politoys F1 car. In 1973 he went into business with the Italian car company Iso but this was not a success and in 1976 he formed a new partnership with Austro-Canadian millionaire Walter Wolf. The Wolf-Williams team was also a failure and at the end of 1977 Frank Head founded Williams Grand Prix Engineering with several members of staff from Wolf-Williams. Williams owned 99% of the shares, his wife Virginia holding the other one percent. Sponsorship from Saudia airlines enabled the team to build the FW06 in 1978 and in 1979 the FW07 gave the team its first victory. Mansour Ojjeh of TAG was an important supporter of the team in the early years but was never a shareholder.
The team's shareholdings remain unchanged until 1988 when Williams gave up 29% of the company and Virginia gave up her shareholding to give the team's technical director Patrick Head a 30% share in the operation. The Williams racing empire now includes three different companies running teams and designing cars in sportscars and touring cars as well as F1.
Irish racing driver Eddie Jordan established Eddie Jordan Racing to run a car in the British Formula 3 Championship in 1980 and began to win races in 1982 with James Weaver. In 1983 Martin Brundle raced for Jordan but it was not until 1987 that Johnny Herbert won Jordan the British F3 title. The team moved to Formula 3000 and won the title in 1989 with Jean Alesi. At the end of 1989 Jordan set up Jordan Grand Prix Ltd which was wholly-owned by a Eddie Jordan Holdings. This in turn was owned by a family trust company in the tax haven of Jersey. The team entered F1 in 1991 and the ownership remained unchanged until November 1998 when Jordan agreed to sell 40% of the team to the venture capitalist company Warburg, Pincus & Co for $60m. Jordan retains the other 60% of the team and makes the important decisions for the team, although it is now run by joint managing-director Trevor Foster.
Warburg, Pincus & Co runs a $6bn investment portfolio which includes a stake in NASCAR team owner Rick Hendrick's Honda dealership network in the United States. The company manages a variety of funds into which small investors contribute. The intention of the shareholding in Jordan is to make money in the long-term with the sale of the shares at a much higher price than the $60m paid.
Benetton Formula Ltd
Luciano Benetton and his sister Giuliana went into business in 1955. She designed sweaters and he sold them. By 1975 the Benetton company had 200 stores in Italy and was looking to expand in the United States. In order to draw attention to the company Benetton was looking for an unusual way to advertise its products and former racing driver Nanni Galli, who supplied the Benettons with wool, suggested Grand Prix racing. A deal was struck with Tyrrell for the 1983 season. This was quite successful but the Benettons wanted more American exposure and so switched to the Euroracing Alfa Romeo team in 1984 because Eddie Cheever was the driver. In May 1985 the Toleman team hit financial trouble and realising that there would be more control if the company owned a team, the Benettons bought Toleman and changed the team's name to Benetton Formula. The new team was officially launched in February 1986 and it is still owned by one of the family holding companies.
Benetton remained the team's major backer for several years but with success commercial sponsorship was found and Benetton's financial input diminished while the Benetton name was kept in the spotlight. The family involvement was enhanced recently with the appointment of Rocco Benetton as chief executive.
PP Sauber AG
When he inherited the family business in the late 1960s Peter Sauber decided that manufacturing traffic lights was really not a very exciting life. So he sold the company and used the profits to establish a racing car construction company in his home town of Hinwil in Switzerland. He built his first car in 1970 and enjoyed increasing success in sportscar racing for the next 20 years, initially with BMW engines and then with Mercedes-Benz. Eventually he convinced the Stuttgart company to return to racing and Sauber-built Mercedes sportscars won four World titles and the Le Mans 24 Hours.
Sauber had hoped to take Mercedes into F1 but in November 1991 the company voted against an F1 programme. Sauber went ahead by himself, although he did receive financial and technical support from Mercedes-Benz. Sauber entered F1 in 1993 and did well. This convinced Mercedes to change its mind and Sauber used Mercedes-Benz engines in 1994. It was not a success and at the end of the season Mercedes agreed a long-term deal with McLaren. Sauber landed a Ford factory engine deal for 1995 and a Lichtenstein businessman Fritz Kaiser negotiated a deal in which the Red Bull drinks company - owned by Austria's Dietrich Mateschitz - joined forces with Sauber to establish a holding company called Red Bull Sauber Holding. This purchased the Sauber F1 team and while Mateschitz owns 51% of the shares, Peter Sauber retains control over the majority of the voting rights of the team. Mateschitz can use the team to promote Red Bull and can sell his shares at a later date, but Sauber still controls the team. Sauber recently reduced his shareholding to 24.5% when he sold another 14.5% to commercial director Fritz Kaiser, who had previously held 10% of Red Bull Sauber Holding.
Arrows Grand Prix International
The Arrows team was established in 1977 by Jackie Oliver, Alan Rees and three colleagues. The other sold their shares and eventually Oliver and Rees became 50-50 partners in the team. In the early 1990s they leased the operation to Japanese businessman Wataru Ohashi of the Footwork Corporation. When he ran into financial trouble, they bought the team back for a fraction of what Ohashi had paid. In March 1996 Tom Walkinshaw acquired a controlling interest in the team although Oliver and Rees retained 49% of the shares. The team was moved to Leafield and an engine deal struck with Yamaha. World Champion Damon Hill was signed to drive for the team and Walkinshaw gambled that the use of Bridgestone tyres might result in some surprise results. Hill was on his way to victory in Hungary in 1997 when his car hit trouble. The team financial trouble in 1998 and at the end of the year Walkinshaw decided to restructure the team. He found backing from a British-based Nigerian prince called Malik Ado Ibrahim and to the investment company Morgan Grenfell Private Equity Ltd, a subsidiary of Deutsche Bank. Walkinshaw retained 25% of the team and was named chairman, Prince Malik owns 25%, the team staff will own 5% and MGPE will control the other 45%. The appointment of Roger Silman as the team's new managing-director suggests that Walkinshaw will still be running the team as Silman has worked for him for the last 15 years.
Paul Stewart - the son of triple World Champion Jackie Stewart - set up his own racing team in 1988 with a lot of unofficial help from his father. PSR then bought the assets of the Gary Evans Motorsport Formula 3000 team and gradually built up to run teams in Formula Vauxhall, Formula 3 and Formula 3000. The team did well in the lower formulae but was not very successful in Formula 3000. In 1995, however, Jackie Stewart convinced the Ford Motor Company to give him its support in Formula 1 and Stewart Grand Prix was established.
The ownership of the team is well-guarded. The majority shareholding (51%) is held by a Jersey-based company called the R&H Trust Co (Jersey) Ltd. This is owned by nominee companies so, in reality, the true ownership of the company is very hard to trace. Under British law anyone with more than 15% of a company must declare it. There are no other declarations for Stewart Grand Prix Ltd and that means that the remaining 49% of the shares are probably split between the members of the Stewart Family. The Stewart Family almost certainly controls the shares in trust in Jersey.
There is no doubt, however, that the Ford Motor Company wants to buy into Stewart Grand Prix. It is contracted to supply the team with technical and financial support for the next few years but is pushing to get more control. The recent appointment of Ford Vice-President Neil Ressler to the Stewart board of directors is evidence of Ford's increasing involvement in F1.
Gauloises Prost Peugeot
Prost Grand Prix was formerly known as Equipe Ligier Gitanes and dates back to 1975 when former racer Guy Ligier established his own F1 team. He had backing from the French government's tobacco company and took on members of the staff from the defunct Matra F1 operation. Ligier controlled the team - with some success in the early 1980s - but it gradually slipped further back down the F1 grid, despite the strong support Ligier received from the French government. In the middle of 1992 Ligier sold 21% of the operation to colorful businessman/politician Cyril de Rouvre, who had previously owned the AGS team. At the end of that year Ligier sold de Rouvre another 69%, but retained 10% for himself.
De Rouvre remained in charge for only a year and was arrested at the end of 1993. Several rival F1 teams tried to buy the team as it had a contract with Renault engine supply in 1994. Eventually, de Rouvre's share in the team was sold to Benetton's Flavio Briatore. He then took the Renault engines to Benetton for the 1995 season and tried to sell the team on to his Benetton partner Tom Walkinshaw, who took over the running of the team. That deal was blocked by Guy Ligier and by the French government and so in March 1996 Walkinshaw quit the team and bought into Arrows. Ligier was left to Briatore again.In February 1997 Briatore and Ligier agree to sell their shares to Alain Prost. He now has complete control of the team.
Giancarlo Minardi comes from a family which holds the oldest Fiat dealership in Italy. While his brothers concentrate on selling Fiat cars and trucks Giancarlo has run the racing teams since 1972 and in 1979 he decided to build his own cars under the Minardi name. With backing from Piero Mancini - who also owned a share of Motori-Moderni - Minardi Team SpA was established and, after some success in F2, entered F1 in 1985. Mancini eventually sold his shares back to Minardi and the team was controlled by Minardi until the end of 1993 when he sold 49% of the team to Scuderia Italia (including shareholders Beppe Lucchini, Vittorio Palazzani, Emilio Gnutti and Dino Marniga).
The team struggled in the years that followed and Minardi was forced to sell other shareholdings to a bank and a building company. By mid-1996 he came under pressure to sell the team to pay debts.
A new holding company was established. This was controlled by Flavio Briatore and Gabriele Rumi, the wealthy F1-mad owner of a foundry business. As part of the deal Minardi was given 14.5% of the new company and Scuderia Italia took another 14.5%, although Marniga decided to take a one percent share of the new company by himself. It was Briatore's intention to sell the team to British American Tobacco but Rumi and Minardi both refused to agree to the deal. At the end of 1997 Briatore sold his shares in the company to Rumi.
When BAR was launched in December 1997 British American Tobacco plc's chairman Martin Broughton said that BAT would control 50% of the shares in the new Formula 1 team. In fact that shareholding is rather more complicated than it appears as it belongs to a company called BAT (Westminster House) Ltd. This owns 50% of British American Racing (Holdings) Ltd while owns the team. The deal is believe to have cost the company around $17.5m, the money having been raised from a variety of different BAT companies including the main BAT plc, Canada's Imasco, Brazil's Souza Cruz and Mexico's Cigaretta La Moderna.
Reynard Motorsport Inc. owns 15% of the team and is contracted to supply staff and engineering services for the next three years - in exchange for payment.
The remaining 35% of BAR is owned by an American company called Mount Eagle Inc. This was established by Craig Pollock and there have long been rumours that Jacques Villeneuve is a shareholder. When the deal was being put together Pollock had trouble raising the necessary money - $12.25m - which would not have been the case if Villeneuve had been involved.
Pollock has since sold a significant shareholding in Mount Eagle Inc. to CART team owner Jerry Forsythe. Although Pollock remains the team's front man it is unclear exactly how much of Mount Eagle Inc. he owns.