An interesting idea...

MARCH 29, 1999

An interesting idea...

THE rumors that Mercedes-Benz might be interested in buying Mansour Ojjeh's majority shareholding of the McLaren team were followed last week by a whisper from France that Ojjeh is keen to sell the TAG McLaren Group in order to finance the purchase of a majority shareholding in Bernie Ecclestone's Formula One Holdings (FOH).

When the first stories surfaced of an FOH flotation, the price was said to be $4bn, but that has been falling steadily for the last two years as Ecclestone has encountered difficulties convincing the financial world that a flotation is a good idea. He has even had trouble raising money from a bond issue. In recent weeks we have heard that Ecclestone is ready to sell a majority shareholding in FOH for $1bn. That would mean that the Ecclestone family would retain a shareholding and so would still be making around $75m a year from the profits generated by FOH.

Under different management the income from FOH would probably rise quite quickly as there are many areas of the business which Ecclestone has not yet exploited or has been unable to exploit because of resistance from the teams. A change of management would open up new possibilities.

Money is certainly not a problem for Ojjeh. The TAG Group has a good reputation in the world of finance and could afford the purchase. The company's stated policy of expansion is to stick to high-technology, high-profile industries which it knows. Grand Prix racing meets those criteria.

Ojjeh says that he is a dealmaker rather than an manager and so he would no doubt be looking for someone to run the sport on his behalf. The obvious choice for the job is McLaren's Ron Dennis.

Dennis and his family control 40% of the TAG McLaren group and if he was to take over the running of FOH that shareholding would have to be sold - to avoid a conflict of interest. The money raised, however, would allow him to become an FOH shareholder.

There is no doubt that Dennis would love to run the sport. It would be the logical career move for him and an opportunity to develop the sport to a new level. He sees himself as a sort of guardian of Grand Prix racing and has often battled against Ecclestone and FIA President Max Mosley as a result. Dennis is 52 this year, which is six years younger than Ecclestone was when he sold the Brabham team in 1988 to concentrate on building up FOH.

While some feel that TAG is unlikely to let go of McLaren, it is worth noting that the company had no qualms about selling its majority shareholding in TAG Heuer in 1996, a well-timed deal which resulted in a profit for TAG of nearly $500m.

The TAG McLaren empire would be an attractive buy for one of the world's cash-rich car companies such as Mercedes-Benz. The group offers not only a variety of high-technology automobile-related subsidiaries, but it also offers a cheap route into the supercar market. At the moment the company is developing a $250,000 Mercedes-engined road car to go into production in the year 2002. The aim of this car is to go head-to-head with Ferrari in the supercar market. If Mercedes was to buy the company it would be in the supercar market without having to waste time in research and development.

The only fly in the ointment is that Max Mosley is not likely to be very pleased by such an arrangement. He is not a big Dennis fan (and vice versa), but if a suitable deal was struck for the FIA, he would probably be content to continue his political battles in Brussels rather than worry himself about F1.

Much of this is currently speculation but the move does make sense for all concerned...

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