Slate.com, 22 May 2012Formula One’s owners are driving a hard bargain. Securing $1.6 billion from pre-IPO investors is a big boost as majority owner CVC readies Bernie Ecclestone’s motor-racing circus for a Singapore flotation. The private equity firm will argue that F1’s juicy contracts, minimal costs, and strong brand merit the pricey enterprise value of more than $9 billion. But cracking new markets and media - not to mention succession planning - are big obstacles.
Promoters, often state-backed outfits keen to boost a city’s profile, can pay $45 million or more a year to host races. Yet F1 keeps most trackside advertising and hospitality dollars; broadcasters pay to cover the contest and take race footage shot by F1; and sponsors pay for exposure. On top of this, the group takes a cut for masterminding the globe-hopping bazaar of cars, kit, drivers, engineers and hangers-on. All this yields plenty of cash with limited central costs. Long deals mean F1 has a $7 billion-plus contract backlog. Full story
