F1 media rights showdown

Oct 26 2011, 00:12 IST
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SummaryThe Formula One Teams Association has hired Evolution Media Capital, a boutique investment bank, to assess the value of its media rights before it negotiates a new funding agreement with CVC, the private equity firm that owns the sport.

By Matthew Garrahan in Los Angeles and Roger Blitz in London

The Formula One Teams Association has hired Evolution Media Capital, a boutique investment bank, to assess the value of its media rights before it negotiates a new funding agreement with CVC, the private equity firm that owns the sport.

Fota, CVC, Bernie Ecclestone, the head of F1, and the Federation Internationale de l’Automobile, the sport’s governing body, are next year due to negotiate a new “Concorde agreement”, which divides up F1 revenues.

But the team owners are anxious to secure a larger share and have hired EMC, which declined to comment, to advise them of their options. “This sport is probably the second or third largest in the world and the teams who take all the financial risk receive a minority share of the revenues,” said a person familiar with the situation. “There is so much value that these guys are sitting on that they are not realising.”

Fota’s move comes at a delicate time for the association, which has grown more powerful over recent years but whose future has been questioned by some teams, including Ferrari and Red Bull, whose driver Sebastian Vettel won this year’s world driver’s championship.

Among the areas of contention is the agreement between the teams to keep costs within acceptable limits in order to protect smaller teams and avoid the kind of spending bonanza that caused F1’s financial crisis in 2008 and 2009.

But the most immediate issue for F1 is the bribery trial beginning on Monday in Germany involving a former Bayern LB banker, who is accused of receiving $44m in alleged bribes from Mr Ecclestone and a family trust in connection with the sale in 2005 of the bank’s stake in the racing series.

With Concorde agreement negotiations not expected to start in earnest until 2012, EMC has time to assess the sport’s global media value, particularly its new media rights. The company is affiliated with Creative Artists Agency, the Hollywood talent agency that represents stars ranging from George Clooney to basketball’s LeBron James. It has advised on $13bn of sports deals, including the recent sale of the Philadelphia 76ers basketball franchise and the $3bn college sports broadcasting deal struck by the Pacific 10 conference of western US universities this summer.

The hiring of EMC comes as potential buyers have explored possible bids for F1. News Corp this year considered a joint bid for the sport with Carlos Slim, the Mexican billionaire, but their interest has not yet materialised in a formal offer.

EMC will work alongside DC Advisory Partners, a London-based firm, in assessing the Fota rights.

Past Concorde negotiations have been fraught. In 2009 talks came close to breaking down when the teams discussed forming a breakaway competition.

© The Financial Times Limited 2011

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