Formula One’s not-for-profit ruling body Federation Internationale de l’Automobile is close to completing an agreement to get more revenue from the auto-racing series, according to two people familiar with the situation.
The FIA will increase its annual income to about $40 million, an increase of at least 40 percent, under pacts with series co-owner CVC Capital Partners Ltd. and teams including champion Red Bull, one of the people said. They spoke on condition of anonymity because the discussions are private. The ruling body said Oct. 23 the contract governing the sport would be signed in the coming weeks.
The FIA, which is based in rented offices in downtown Paris, is taking advantage of Formula One’s financial health as stakeholders draw up a new contract, according to Simon Chadwick, a professor of sports marketing strategy at the U.K.’s Coventry University. The current accord expires Dec. 31.
“They’re harvesting: they’re trying to make as much money as possible while it’s there,” Chadwick said.
The FIA was founded in 1904 and also represents motoring organizations and promotes road safety. In Formula One, it oversees the technical specifications of racing cars and handles medical support and media accreditation. Under the agreement, the FIA would get about $25 million from the series owners and more than $15 million from teams in entry fees, one of the people said.
Red Bull will pay the FIA $3.3 million for 2013 -- more than ten times as much as this year -- under the teams’ agreement that’s based on championship points, while Ferrari faces a $2.5 million bill, Autosport.com reported Nov. 30.
FIA board member Nick Craw and spokesman Norman Howell declined to comment on the financial situation of the organization. CVC’s outside public relations firm and series Chief Executive Officer Bernie Ecclestone didn’t immediately return calls seeking comment.
CVC, which had already reached commercial accords with most of the 12 racing teams, said May 22 it sold 21 percent of Formula One to BlackRock Inc., Waddell & Reed Financial Inc. and Norges Bank Investment Management for $1.6 billion. It suspended a planned initial public offering of the series in June because of market conditions.
The London-based private equity group has reaped more than $4 billion on its original investment of $1 billion and expects to make as much as $7 billion, CVC partner Donald Mackenzie said in an Oct. 29 interview.
The FIA leased the commercial rights to Formula One for a century to a group led by Ecclestone for $314 million in 2000, according to then-president Max Mosley. The money, and $55 million from a fine imposed on the McLaren team in 2007 for spying on competitors, was put into the FIA Foundation, a London-based road-safety charity, Mosley said by phone last week.
Current FIA president Jean Todt told the Financial Times on Oct. 31 that the FIA “cannot be a federation without having any revenue. So where do we find our revenues?”
Mosley, who retired in 2009, said the organization “always balanced the books” and had about 30 million euros ($39 million) in cash in the bank during his tenure. The organization recently refurbished its offices and, according to its website, is paying for more than 230 officials to attend a five-day annual general assembly that starts today in a five-star hotel in Istanbul.
The FIA Foundation had 308 million euros of investment assets on Dec. 31 last year, according to its latest financial statement filed at Companies House in London.
“The FIA isn’t in financial difficulty,” Mosley said.