OCTOBER 30, 2000

It's decision time at BAR

THIS week the board of directors of British American Racing (Holdings) Ltd. meets to discuss the future of British American Racing and there is expected to be a showdown between Craig Pollock and his allies and Adrian Reynard and his supporters.

THIS week the board of directors of British American Racing (Holdings) Ltd. meets to discuss the future of British AmericanÊRacing and there is expected to be a showdown between Craig Pollock and his allies and Adrian Reynard and his supporters. The future of the team rests in the hands of the British American Tobacco representatives on the board, including Canadian RonÊBrown, who has been chairman of the holding company since January. The various BAT subsidiaries around the world control 50% of the shares in the company and the majority of seats on the board. Other board members include Pollock, Reynard and CART team owner Gerry Forsythe.

The big question is whether Reynard has been able to convince any of the BAT companies to vote to oust Pollock. The board did decide to replace him as chairman when Brown got the job, but in the course of the last few months Pollock has done a good job with the team, despite losing a number of his supporters within the BAT hierarchy. BAT continues to hold 50% of the shares in the team, a company called Mounteagle holds 35% and Reynard has 15%. Originally Pollock controlled Mounteagle but there have been rumors that CART team boss Gerry Forsythe owns a large part of that company. Forsythe has close links with BAT, the company owning 50% of his CART team.

Reynard is believed to be bidding to oust Pollock from the role of managing-director of the team. There has been talk in recent months that Barry Green would be put in to replace him but it remains to be seen if this will happen. Green is close to Don Brown and has been advising him about BAR for some time but whether he will be transferred into the team is another matter. Reynard, Green and Honda are close thanks to their successful relationship in CART with Team Kool Green.

There has been talk that Reynard may be trying to buy BAT's shares in the team but it is unlikely that he can afford them. Reynard Motorsport is not doing well at the moment. The company has lost a lot of business because of Lola's comeback in CART and the various sportscar programs have not been a success. A lot of Reynard staff have been laid off in recent months and there have been stories that the company has a number of problems related to tax payments and loans.

In recent weeks Adrian Reynard has been in negotiation to sell the entire company to Prodrive but he has been turned down by David Richards's firm after it had a look at the company's financial situation. Richards is not saying what he found but it was obviously enough to change his mind. We believe that a number of parts of the business are already optioned to other racing car companies with Roger Penske believed to hold several of the options.

Obviously Reynard would be able to become more involved in BAR if he no longer owned the company he has been building for 25 years but there seems to be little point in his being involved unless he owns the firm. It is possible that he has found venture capital money to fund a bid and his close relationship with Honda could be a significant factor. If he can raise enough money to give BAT a free sponsorship deal in 2001 it might be an attractive deal for the tobacco firm while Reynard's links with Honda could enable him to get the engines for free, which would greatly reduce costs. It should also be considered that Reynard might be fronting a takeover of BAR by Honda. The Japanese car company does not want to be seen to be buying the team at the moment but it does want to own the operation in the medium term. It is thus not impossible that Reynard may have suggested an arrangement in which he and his partners would buy two-thirds of BAT's shares and Honda would buy the rest. Honda might also be given an option to buy the team from Reynard whenever it wishes to do so. This would provide Honda with more time to gets its chassis engineers ready.

A Reynard takeover is thus not an impossibility, even if the main Reynard company is in financial trouble, but Pollock will no doubt not be giving up without a fight. His trump card is his relationship with Jacques Villeneuve and the fact that Benetton is keen to sign up Jacques if he decides to leave BAR. That would leave the team without a frontline driver in 2001.

If BAT is presented with the right deal, it will probably leave F1, particularly if offered free sponsorship for a season or more. Those who promoted the F1 idea have all gone and BAT management have no great love of the sport. They know that the company achieved considerably more in rallying and may wish to spend their budgets on rally cars, which are much more popular than F1 in the expanding markets of Asia.