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Bernie Ecclestone, Sir Martin Sorrell and executives to reap $40m in F1 selloff

The Guardian logo The Guardian 26-01-2017 Christian Sylt
Sir Martin Sorrell and Bernie Ecclestone. The takeover deal was fuelled with a mixture of cash and shares in Liberty handed to F1’s management. © Getty Images for Advertising Week Europe Sir Martin Sorrell and Bernie Ecclestone. The takeover deal was fuelled with a mixture of cash and shares in Liberty handed to F1’s management.

Bernie Ecclestone and Sir Martin Sorrell, two of Europe’s most well-known businessmen, are among a handful of executives to have reaped a $40m payoff from the sale of Formula One (F1) auto racing to US media conglomerate Liberty Media.

On Monday, Liberty closed its $8bn takeover of F1’s parent company Delta Topco, which was controlled by the private equity firm CVC. The deal was fuelled with a mixture of cash and shares in Liberty handed to F1’s previous shareholders including the company’s management.

Most of the shareholders are not able to sell their stock during a six-month lock-up period following completion of the acquisition but some of the management have an exemption and they are taking advantage of it.

According to a prospectus released Wednesday, seven of F1’s key figures are selling up to $39.9m of shares in Liberty which has been renamed the Formula One Group with the ticker FWONK.

The prospectus states that it “relates to the offer and sale by the Selling Stockholders of up to 1,357,700 shares of FWONK” which closed at $29.42 on Tuesday. The offering is being underwritten by UBS and the biggest seller is Ecclestone, who became F1’s chairman emeritus following the takeover after 40 years as its CEO.

He is selling up to 950,599 shares worth $28m leaving him with 0.5% of the company. The second-largest number on offer are from finance director Duncan Llowarch, who has put $4.6m of stock up for sale. Sorrell, who is chief executive of WPP, the world’s biggest advertising company, is also one of Delta Topco’s non-executive directors and is selling $1.9m of his shares.

Liberty has already made an impact on F1 after just a few days of holding the keys. It has replaced Ecclestone with former 21st Century Fox president Chase Carey who has become F1’s chairman and chief executive whilst ex-ESPN marketing director Sean Bratches has been hired as commercial director. Former Mercedes team boss Ross Brawn completes the trio in a newly-created role as sporting manager.

Liberty has little experience in sports management, with its main investment in this area being a stake in the Atlanta Braves baseball team. It also owns shares in event promoter Live Nation as well as media giants Time Warner and Viacom.
It has said it was attracted to F1 due to the growth potential of the business which made underlying profits of $463.6m on revenue of $1.7bn in the year to 31 December 2015, according to its latest accounts. Although it is the world’s most-watched annual sports series with 400m viewers annually, it is under-exposed in the United States with just one race in Texas compared to ninein Europe and six in Asia. According to Liberty, F1 currently derives less than 1% of its revenue from digital so it has said it intends to boost its online offering.

The takeover has had a mixed reception from the market and industry. Since it was announced in September Liberty’s share price has accelerated 35.8%. In December this surge lured $1.6bn of investment from funds including Coatue Management, Ruane and SPO Advisory. They bought stock at the reduced price of $25 per share and the proceeds were used to increase the cash paid to F1’s shareholders.

However, F1’s 11 teams have not been so receptive to Liberty’s plans. They include introducing a cap on budgets and levelling out F1’s $903.7m prize money payments which currently see Ferrari race off with around $172m whilst the last-placed team gets $48.5m.

In the first week of January, the teams were offered the chance to buy up to $1.1bn of Liberty stock but none of them took it up by the deadline. The amount on offer has since been reduced to $400m and it is understood that they have until June to decide. Their contracts to race in F1 expire at the end of 2020, so the race is on for Liberty to get them on side. Time will tell whether it can rev up their interest now that it is actually in the driving seat.

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