CVC to sell Formula One to Liberty Media in $8bn deal

The sale will bring to an end a 10-year holding period for CVC, with payment structured as a mixture of cash and Liberty equity.

Selling shareholders will receive a combined $1.1bn in cash, $351m in new Liberty shares and a $351m exchangeable debt instrument that will be convertible into Liberty shares. The transaction values F1's equity at $4.4bn.

The sale will proceed after receiving regulatory approval and the consent of F1's governing body, Fédération Internationale de l'Automobile (FIA). In the meantime Liberty has acquired an initial 18.7% for a cash consideration of $746m. CVC will remain as the majority owner until these conditions are met.

Upon completion of the deal, a CVC representative will take a seat on the Liberty board. F1's existing CEO Bernie Ecclestone will remain in his role as CEO of the company, while chairperson Peter Brabeck-Letmathe will be replaced by former News Corp president and 21st Century Fox COO Chase Carey.

However, Ecclestone is expected to step aside after a three-year period to make way for a new CEO, according to various media reports.

F1 has experienced a turbulent period over the past few years. In 2014, media reports suggested CVC was making moves to sell its controlling stake in the business as a result of a court case surrounding bribery allegations brought against Ecclestone. The court case investigated allegations put forward by German media group Constantin Medien that F1 was knowingly undersold in 2006, when CVC purchased the asset for $1.7bn from BayernLB.

In June 2012, former BayernLB banker Gerhard Gribkowsky was sentenced to eight years and six months in prison following his trial for corruption, breach of trust and tax evasion. Gribkowsky admitted to taking bribes amounting to $44m from F1 chief executive Ecclestone during the sale of the company to CVC.

Two years later, a court of appeal refused to grant Constantin Medien the right to challenge a previous high court decision ruling in Ecclestone's favour. The media business had been seeking £80m in damages from the F1 CEO.

At various points throughout its tenure, CVC explored IPO plans for the business, though these were put on hold twice. Initially, the GP postponed a flotation on the Singapore Stock Exchange in June 2012 due to market volatility linked to lower than expected growth figures in China and India. Then, in November 2013, CVC co-founder Donald Mackenzie told the Financial Times the process had been delayed again as the result of the high court's ongoing legal battle with Ecclestone.

Previous funding
CVC acquired a controlling stake in F1 for an undisclosed sum said to be in the region of $1.7bn in 2006. As well as CVC and Ecclestone, shareholders in the Alpha Prema newco included Bambino Holdings and the F1 management team.

In May 2012, CVC sold a $1.6bn stake to BlackRock, Waddell & Reed and Norges Bank Investment Management, reducing its stake from 63.4% to around 40%. The partial exit was believed to value F1 at $9.1bn, including debt.

Company
Founded in 1974 as the Formula One Constructors Association, London-headquartered F1 manages the FIA Formula One Championship.

People
CVC Capital Partners – Donald Mackenzie (co-chairperson).
Liberty Media – Greg Maffei (president, CEO).
Formula One Group – Bernie Ecclestone (CEO); Chase Carey (chairperson).

Advisers
Vendor – Goldman Sachs International (corporate finance, financial due diligence); Freshfields Bruckhaus Deringer (legal); Weil Gotshal & Manges (legal).
Acquirer – Morgan Stanley (corporate finance, financial due diligence, tax); Baker Botts (legal).

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• Topics
• Exits
• UK / Ireland
• Consumer
• United Kingdom
• CVC Capital Partners
• Trade sale