JULY 3, 2000

Peugeot decides to stay in F1

ALTHOUGH it was not officially announced at the French Grand Prix we understand that Automobiles Peugeot has decided that it is not going to sell its Formula 1 technology to a third party as had been discussed and is planning to buy a FormulaÊ1 team instead and run the operation itself. In order to pay for this Peugeot bosses decided that it was necessary to find a partner and is understood to be going into the program with the Vivendi company.

Vivendi is currently in the process of transforming itself from being a water company (formerly known as CompagnieÊGeneraleÊdes Eaux) into Europe's biggest media and communications business. The firm was taken over in 1995 by Jean-Marie Messier who diversified into the media in 1998 by buying control of Havas which owned shares in a variety of media and communications businesses including mobile phone company Cegetal, TV channels Canal + and BSkyB, film distribution company UGC and internet firm AOL France. Vivendi has just pulled off a major deal to buy Universal Studios from Canadian drinks company Seagram for $35b. This has given Vivendi access to a large amount of content for its media operations, notably music from the MCA and Polygram companies, movies such as Jurassic Park and ET and TV programming which includes Miami Vice, The A Team and Magnum PI.

The firm recently went into partnership with the mobile phone company Vodaphone AirTouch to establish a mobile phone Internet portal called Vizzavi. This was launched just a few days ago and Vivendi is aiming to have as many as 80m people using it within a year. In order to advertise Vizzavi, Messier is believed to have concluded that Grand Prix racing would be the best way to advertise the new service. Vivendi's major competitors in Europe are France Telecom (which recently bought the Orange mobile phone company, the title sponsors of Arrows) and Telefonica, which currently sponsors Minardi but which is expected to move to the new Renault team in 2001 or 2002.

Our spies say that the most likely course of action will be a takeover of Prost Grand Prix by the Peugeot-Vivendi partnership. Alain Prost has been struggling to find an engine and is not enjoying himself as a team owner. It is possible that Prost could stay on as a figurehead but it is more likely that Peugeot would prefer a clean break. Prost says that he intends to go on fighting and will not give up the struggle.

This might explain suggestions that Peugeot and Vivendi have also been talking to Arrows. Tom Walkinshaw's team is believed to be discussing a deal with another potential investor in Formula 1, American millionaire Tony Johnson, who has also been talking to Minardi in recent weeks.