CVC Capital Partners Ltd. said today it agreed to sell 21 percent of Formula One to BlackRock Inc. (BLK) and two other investors for $1.6 billion as it prepares an initial public offering of the auto racing series.
Waddell & Reed Financial Inc. (WDR) and Norges Bank Investment Management are the other buyers, the private equity firm said.
CVC, based in London, is reducing its stake in the series it took control of in 2006 as it moves ahead with plans to raise as much as $3 billion in an IPO next month in Singapore, the racing series’ chief executive, Bernie Ecclestone, said.
“It looks like it’s on track with no dramas,” Ecclestone said in a phone interview from London. “It’s cheap compared to Facebook,” he said, referring to the social networking site that raised $16 billion in an IPO last week.
Ecclestone, 81, said he will travel to Singapore in the week after the Monaco Grand Prix on May 27 to speak to investors as part of a road show in the Asian city state.
CVC bought 63.4 percent of Formula One in 2005 and 2006 using $2.5 billion of loans. The private equity firm is cashing in on its stake after leading racing teams Ferrari, Red Bull and McLaren agreed to new terms through 2020, according to Mark Jenkins, a professor of business strategy at the U.K.’s Cranfield University who has written a book about Formula One.
“It’s the optimal time to sell the business,” Jenkins said by telephone.
Retaining a Stake
Ecclestone said CVC would retain a stake in the business after the IPO, without saying how much. Other shareholders include the administrators of bankrupt Lehman Brothers Holdings Inc., which holds 15.3 percent, and Ecclestone’s former wife Slavica, who holds 8.5 percent through Bambino Holdings Ltd. Ecclestone owns 5.3 percent.
Ecclestone, who says he doesn’t expect his role to change as CVC sells equity, said he has championed the financial stability of Formula One to investors at a meeting in London and in phone conversations.
“It’s a proper business with proper contracts,” Ecclestone said. The series has a contract backlog of more than $7 billion with broadcasters and race promoters, according to an April 18 report from Standard & Poor’s.
Ecclestone is seeking to boost the 20-race championship’s popularity in China and the U.S., he said.
Ratings on China’s CCTV network fell from 13 million at the first Chinese Grand Prix in 2004 to 1.5 million for last year’s race, according to Ma Guoli, the former managing director of CTV’s sports channel who now works for Infront Sports & Media, based in Zug, Switzerland.
A race in Austin, Texas, scheduled for Nov. 18 would end Formula One’s five-year absence from the U.S., where Nascar is more popular.
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