NOVEMBER 15, 1999
The future of Arrows
TOM WALKINSHAW has vehemently denied stories that he is negotiating the sale of Arrows to David Richards of Prodrive, but most Formula 1 sources do not seem to believe the Scotsman.
It is a sad reflection for Walkinshaw that hardly anyone in F1 believes the denial although it is actually unlikely that he has been talking to Richards as the two have long been rivals and to sell out to Prodrive would be a hefty blow to the WalkinshawÊego.
But this does not mean that Arrows is not in discussion with other potential investors and, as Walkinshaw does not obviously control a majority of the shares in the team, it is possible that anything could happen. Walkinshaw's partner MorganÊGrenfellÊPrivate Equity Ltd. bought 40% of the Arrows team in January but the venture capitalist company is currently in the process of acquiring 50% of Bernie Ecclestone's Formula One Holdings and there is a very clear clash of interest between the two roles. It is likely, therefore, that MGPE will sell its share in Arrows. We have been hearing rumors of that since before the FOH deal, with the price tag believed to be around $45m.
Walkinshaw controls 40% of the Arrows shares but the ownership of the remaining 20% is rather complicated as the option to acquire them was not taken up by Prince Malik ado Ibrahim, who was unable to raise the money to pay for them. Since September these shares have been available for sale although it is unclear who actually owns them. It may be that they are not actually owned by anyone but that the sale of them is under the joint control of Walkinshaw and MGPE.
In all probability there is a deal between Walkinshaw and MGPE for one to offer the other shares before selling them to a third party but if Walkinshaw does not want to or cannot raise the money necessary MGPE could sell its shares to a third party - and that means that there is the potential for a buyer to acquire what is effectively 50% of the team and might then bid for Walkinshaw's shares.
The problem for Arrows is that it needs a minimum budget of around $53m next year and we hear that it has currently raised only $32m. Faced by this $21m budgetary shortfall Walkinshaw may decide that it is better to keep a minority shareholding in the team and let someone else take the risks - as he did at the start of this year with Prince Malik. If the new investors have considerable financial backing this would be a sensible course of action for the Scotsman as his shareholding would increase in value.
In his past dealings in F1 Walkinshaw has always been a realist. When things have not gone well he has been willing to step back, sell up and then buy into another team. This happened when he went from Benetton to Ligier and then again when he switched to Arrows.
The question is whether or not there are potential buyers out there. At the moment there are several, notably former Sauber partner Fritz Kaiser who has money available having sold his 24.5% share of the Swiss team. It was Kaiser who convinced Petronas to join Sauber and he remains very close to the management of the Malaysian oil company. This is rumored to be on the verge of buying the struggling Proton car company. Proton owns Group Lotus and the Malaysian government is reportedly keen to use the Lotus name and technology to promote the image of Malaysia as a high technology country. A Lotus F1 team - as has been rumored in recent days in Malaysian newspapers - makes a great deal of sense.
It should be remembered that when Kaiser and Peter Sauber were discussing the future of the Swiss team there were rumors that Kaiser wanted to move the team to Britain and go into business with Richards. Richards is also well-connected with Proton, having had negotiations with the Malaysian firm dating back several years.
As no-one involved is talking, it is difficult to know exactly what is happening but it is not hard to imagine a situation in which Kaiser (with Petronas in the wings) tries to acquire Arrows - the most vulnerable team at the moment apart from Minardi - with the intention of later joining forces with Richards.
At the same time Sauber is trying hard to keep Petronas after the end of 2000 and recently unveiled a new management structure for his team, featuring former Dow Chemical executive Heinz Haller and a new marketing manager in Marco Feser, who joins the team from AMAG, a Swiss car import business for which Feser looked after Porsche products.
Peter Sauber remains as chairman and team principal and Jost Capito continues in his role as chief operating officer.
The Malaysian decisions will be dependent to some extent on the outcome of the forthcoming election although PrimeÊMinister Mahathir Mohamad is likely to be returned to office on November 29.