MOTORSPORT: American mogul eyes buying F1

American pay TV mogul John Malone is making a play to buy almost half of the company that handles Formula One’s commercial operations – a move that is seen as probably bringing him into fresh conflict with expatriate Australian Rupert Murdoch’s News empire.

Malone has put out a feeler about buying private equity powerhouse CVC’s 35 per cent of key F1 company Delta Topco, as well as another 14 per cent. Having already sold almost half the stake it bought eight years ago, CVC reportedly has made five times the money it outlaid initially and stands to reap another windfall.

A remnant of the defunct Wall Street investment bank Lehmann Brothers has indicated it wants to sell its 12.3 per cent share of Delta Topco by the end of June. That stake combined with CVC’s would give Malone almost the 49 per cent he is seeking.

Any deal could value Delta Topco at up to US$10.5 billion (A$11.8 billion).

Murdoch’s News was interested in buying into F1 in 2011 with Italy’s Exor, an investment company of the Agnelli family that controls Fiat and Ferrari, but that plan evaporated when News became embroiled in the British phone hacking scandal. However, Murdoch-owned BSkyB is now the major British telecaster of F1, while Malone owns its rival, Virgin Media.

While Malone has not made any formal offer for what would constitute a controlling stake in Delta Topco, potential complications are whether Bernie Ecclestone would remain at the sport’s helm and whether its governing body, the Federation Internationale de l’Automobile (FIA), may try to veto a change in ownership of its commercial rights holder.

Ecclestone is to face a criminal trial in Germany in April charged with bribing jailed German banker Gerhard Gribkowsky. He would face up to 10 years in jail if convicted. He is also the subject of legal action in Britain and the US, where a recent judgment in his favour has been appealed, while Swiss investigators are probing his affairs.

Ecclestone remains in the “driver’s seat” at Delta Topco for now, although he has stood down from the board pending the German trial.

CVC has appeared keen to cash in the remainder of its massively enhanced investment in F1, but two attempts to do it through a public float on the Singapore stock exchange have been thwarted, largely by Ecclestone’s legal troubles.

F1 was telecast exclusively on free-to-air TV until recent years, but Ecclestone has engineered deals in several key countries giving pay TV the first rights while retaining substantial free coverage. TV revenues and race sanction fees are Delta Topco’s major income streams.

American interest in F1 remains slight, although the new US Grand Prix in Texas has been comparatively well received the past two years.

Malone’s assets, through his Liberty and Discovery companies, include the Atlanta Braves baseball team. He has spent about US$30 billion in Europe in the past couple of years buying pay TV businesses - Virgin Media for US$16 billion, Holland’s Ziggo, Germany’s Unitymedia, Belgium’s Telenet and most recently increasing his stake in the Eurosport network to 51 per cent.

He also is involved in a US$60 billion battle in the US to control Time Warner Cable.

London’s Financial Times has said of Malone’s sudden interest in F1: “Any move into sports rights ownership would give his expanding empire an advantage over rivals such as Rupert Murdoch’s News Corp, British Telecom T [a big player in English football telecasting] and others who spend billions of dollars to secure the rights to broadcast live sport.”

And a report in The Telegraph in London said: “Any deal between F1 and Liberty Global would be a major problem for the octogenarian founder of the News Corporation newspaper group and the 21st Century Fox film and television behemoth [Murdoch].”

It reported that financial analysts predicted Murdoch ultimately may make another move on F1, although one – Alex De Groote at Panmure – said: “I am not sure he has the firepower [on his own] - but I wouldn’t discount Murdoch at all.”  

Mexican telecommunications tycoon Carlos Slim, reputedly the world’s richest man now, was mentioned as a possible partner of Murdoch and Exor in the 2011 plan.

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