James Murdoch, News Corp Deputy COO, confirmed today that News Corp is spearheading a consortium of interested parties in approaching F1 (Formula One) stake holders, including Bernie Ecclestone and CVC Partners who own 63 percent of Formula One racing. For their part, Ecclestone and others say F1 is not for sale. Unofficially, however, “friendly” discussions continue, and such a transaction represents a perfect vertical integration for all interested parties.
The group interested in buying F1 includes the usual rich and powerful suspects: Murdoch’s and their News Corp; richest-man-in-the-world Carlos Slim and his Telmex; and Exor, the investment firm and financing arm of the Agnelli family who own majority positions of Fiat and Ferrari.
At issue for the remaining smaller equity stakeholders (other team owners) of F1 are the revenue sharing agreements that have heavily favored the CVC group. But, even if James Murdoch and News Corp could persuade all of the teams to endorse F1 being acquired by the consortium, CVC and Ecclestone have first right of refusal and most certainly would nix any such acquisition unless it meets their terms. Then there’s also the potential requirement of an EU approval due to the size of the merger.
Of course, News Corp has been here before with Dow Jones, parent company to The Wall Street Journal, the newly acquired news flagship for News Corp. Murdoch-the-elder worked all of the right back channels and in the end painted a picture rosy enough that even the doubters of the family that owned key stakes of the Dow Jones group came around and signed-off on the deal. News Corp also knows how to work within the public policy strictures of governmental compliance. The UK and the US have signed off on large and recent News Corp transactions; these cocky little Ausies have the “big mo” in their favor, i.e., momentum.
By all accounts, even the team sports weary News Corp should be excited about the synergy such an F1 acquisition represents. Fox (News Corp) television recently owned the Los Angeles Dodgers organization, but eventually the arrangement soured and the team was sold-off. However, F1 is a much different and vastly improved sports endorsement syllogism for the consortium.
First, they wouldn’t simply own a team, but a sport. The biggest cost to the various media has historically been the broadcasting rights, e.g., Fox recently agreed to pay $3 billion for the local broadcast rights for the Los Angeles Dodgers. Imagine if the consortium owned the entire sport, such a transaction would be vastly different (i.e., demonstrably cheaper) if News Corp were one of those owners of F1. Secondly, News Corp and Telmex and Exor are entities all with a global footprint. F1 runs major races in Turkey, the Middle-East, North America, South America, Asia and Europe. With the exception of futbol/soccer, there is arguably no better sport for these players to own to penetrate new and emerging markets, including China.
Finally, all of the consortium suitors have cash – lots of it. News Corp alone has $12 billion just waiting to be used to acquire the remaining outstanding stock for the recently government approved B-Sky-B acquisition. An F1 acquisition portends a glamorous demographic (read, luxury) with viewers of News Corp media outlets, using their Telmex cellular smartphones, wishing to purchase Fiat/Ferrari product—lines. And, let’s not forget those ancillary advertisers with an appetite to spend, desirous to reach these worldwide viewers of a sport that has yet to hit its top gear.