CVC takes the chequered flag

By Paul Mackintosh - 28/05/12

Declaration of interest: I am a Formula 1 nut and a raving petrolhead. So post mortems on the Facebook IPO are going to have to wait, and readers are going to have to digest a whole formation lap’s worth of bad wordplay until the SGX listing – or until the Singtel Singapore Grand Prix in late September, probably. For CVC Capital Partners has just brought off one of the best vindications of its 2006 move into Formula 1, announcing a US$1.6 billion cash investment for aggregate 21% equity in the business by Waddell & Reed, Blackrock and Norges Bank.

"This is great news for Formula 1 and an important step in its development,” said Donald Mackenzie, managing partner of CVC Capital Partners. “The addition of these three highly regarded investors to our share register is validation of this success, and we look forward to working with our new partners over the coming years." The deal also gave Formula 1 a firm valuation of $7.6 billion ahead of the IPO. Latest Reuters reports indicate that CVC, still holding 42% of the company after the sale, will trim this to 30% post-listing, floating up to $3 billion of stock at IPO at 18-22x earnings.

Goldman Sachs, Morgan Stanley and UBS are taking the podium positions on management of the flotation. Local bookrunners and managers are not being neglected either, with DBS Group and CIMB Group on the slate. And post the CVC sale, F1 already has blue-chip institutional endorsement. Norges Bank Investment Management, the Norges Bank investing entity, is after all the manager for the Norwegian Government Pension Fund Global (GPFG), the world’s largest pension fund at NOK3.31 trillion ($552 billion) in 2011, whose fearsome standards of probity have challenged even such corporate giants as Boeing and Siemens. Waddell & Reed has been around since 1937.

Such solid anchor investors may be just what the IPO needs. According to the Financial Times, the pre-marketing circular for the listing includes admissions that Bernie Ecclestone’s legal entanglements, or simply his age, could adversely affect the company’s performance, even with a succession plan in place. But perhaps their presence can move things past his pit-bull grip on the sport, or Max Mosley’s antics, and help Formula 1 finally grow up.

It will almost certainly go up, though. “It’s cheap compared to Facebook,” Mr. Ecclestone told Bloomberg. Time to reflect who is more likely to deliver you better value at IPO: a 28-year-old programmer or an 81-year-old veteran racing demon.