Formula One Group

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The Formula One logo.

The Formula One Group is a group of companies responsible for the promotion of the FIA Formula One World Championship and exploitation of the sport's commercial rights.^[1] The Group is owned ultimately by Delta Topco, a Jersey–based company owned by CVC Capital Partners' funds (approximately 70%) and JPMorgan and Lehman Brothers (approximately 20%). Bernie Ecclestone's family trust owns the remainder apart from small shares held by financial advisers and Ecclestone himself.^[2]

"Formula One Group" strictly refers to Formula One Management, Formula One Administration and Formula One Licensing BV,^[3] which are subsidiaries of the Formula One Holdings holding company. However Delta Topco owns other Formula One businesses which are referred to in the same way.

[edit] History

In 1974 the Formula One Constructors Association, or FOCA, was founded in order to increase commercial organisation of Formula One for the benefit of the racing teams. In 1978 Bernie Ecclestone became the executive of FOCA and fought the Fédération Internationale du Sport Automobile (FISA) for control of F1 commercial rights. Disputes were settled by March 1981 when the Concorde Agreement gave FOCA the right to negotiate TV contracts. Under previous arrangements, TV contracts were not very lucrative and were risky. When the Concorde Agreement ended in 1987, Bernie Ecclestone ceased being a team owner and established the Formula One Promotions and Administration, or FOPA, to manage TV rights for the teams. FOPA would later become known as Formula One Management. FOPA received 23% of TV revenues, 47% went to the teams, and 30% to the FIA. FOPA, however, received all the fees paid by promoters. In exchange for this FOPA paid prize money to the teams.

Bernie Ecclestone, CEO of FOM and FOA

In 1995 the FIA decided to grant the commercial rights to F1 to Formula One Administration (managed by FOM) for a 14 year period. In exchange, Ecclestone would provide an annual payment. With FOM having exclusive rights to popular team names like Team McLaren, WilliamsF1, and Tyrrell Formula One, the aforementioned teams protested by rejecting the following Concorde Agreement in 1997. Team McLaren, WilliamsF1, Scuderia Ferrari and Renault F1 formed GPWC Holdings and threatened to form a rival racing franchise in 2008 when their current contract ends in 2007.

[edit] Ecclestone sells shares of F1

SLEC Holdings was created as the holding company of the Formula One companies in 1996 when Bernie Ecclestone transferred his ownership of Formula One businesses to his wife, Slavica Ecclestone, in preparation for a 1997 flotation of the group.^[4] In October 1999 Morgan Grenfell Private Equity (MGPE) acquired 12.5% of SLEC for £234 million.^[5] In February 2000 Hellman and Friedman purchased a 37.5% share of SLEC for £625 million and combined its share with that of MGPE to form Speed Investments which thus had a combined holding of 50% of SLEC.^[5][6] On 22 March 2000 German media company EM.TV & Merchandising purchased Speed Investments for £1.1 billion.^[7]

EM.TV's acquisitions caused it financial difficulties; following its announcement that its 2000 earnings would be below expectations and it was struggling with its debts, the share price dropped 90%.^[8] In February the Kirch Group agreed to rescue EM.TV in return for a stake in the company and control of Speed Investments.^[6] The two companies also agreed to exercise EM.TV's option to purchase another 25% of SLEC for approximately £600 million in late-March 2001.^[9] To raise Speed Investments' share of SLEC to 75% Kirch borrowed €1.6 billion, €1 billion from Bayerische Landesbank and the rest from Lehman Brothers and JPMorgan Chase.^[10] Kirch's involvement raised concerns among the major motor manufacturers who participate in Formula One; BMW, DaimlerChrysler, Fiat, Ford, and Renault formed GPWC Holding BV to secure better representation of the manufacturers in F1, improved financial conditions for the teams, stability for the championship, and maintenance of free-to-air television coverage.^[10]

Due to the agreement associated with their shareholding SLEC was controlled by Kirch, who hence controlled the board of Formula One Holdings (FOH). Due to huge losses and massive expenditure, Kirch's creditors put the company into receivership in 2002. These banks dismantled the group. Kirch's share of SLEC was retained by Bayerische Landesbank, JPMorgan Chase and Lehman Brothers (through Speed Investments).

Before they could exercise their rights as shareholders they had to seek clearance from the European Commission. In the intervening period Ecclestone instituted changes in the boards of SLEC, FOH, Formula One Administration and Formula One Management which in effect put Bambino Holdings in control of those companies.

In mid-November 2004, the three banks sued Ecclestone for more control over the sport, prompting speculation that Ecclestone might altogether lose the control he has maintained for more than thirty years. A two-day hearing began on November 23, but after the proceedings had ended the following day, Justice Andrew Park announced his intention to reserve ruling for several weeks. On December 6, 2004, Park read his verdict, stating that "In [his] judgment it is clear that Speed's contentions are correct and [he] should therefore make the declarations which it requests" [1]. However, Ecclestone insisted that the verdict - seen almost universally as a legal blow to his control of Formula One - would mean "nothing at all" [2]. He stated his intention to appeal the decision.

The following day, at a meeting of team bosses at Heathrow Airport in London, Ecclestone offered the teams a total of £260,000,000 over three years in return for unanimous renewal of the Concorde Agreement, which expires in 2008 [3]. Weeks later, Gerhard Gibkowsky, a board member of Bayerische Landesbank and the chairman of SLEC, stated that the banks had no intention to remove Ecclestone from his position of control [4].

[edit] CVC acquisition

In November 2005 CVC Capital Partners announced it was to acquire the 25% and 48% shares of Bambino and Bayerische Landesbank in SLEC and acquired the shares of JPMorgan Chase in December 2005. This deal was given approval by the European Commission on March 21 2006 and finalised on March 28. Ecclestone used the proceeds of the sale of Bambino Holdings' share to invest in Alpha Prema to give the Ecclestone family an unspecified stake in Alpha Prema. [5]

On March 30 2006 CVC purchased the 14.1% share of SLEC held by Lehman Brothers to give Alpha Prema full control of the Formula One Group.

[edit] Group companies

The Group companies are subsidiaries of Formula One Holdings (FOH), itself a subsidiary of SLEC Holdings. As of September 2007 the board of FOH consisted of Donald Mackenzie, Nicholas James Clarry, Sacha Jane Woodward Hill, Bernie Ecclestone and Duncan Llowarch.

[edit] Formula One Administration

Formula One Administration Ltd. or FOA holds the commercial rights to Formula One. These rights are granted to FOA by the FIA under the terms of the Concorde Agreement and are managed by Formula One Management.

In its annual accounts filed with Companies House, FOA reported turnover of $750 million and pre-tax profits of $447 million (up from $215m in 2003 and $127m in 2002). This has allowed the company to slash its debts by $347 million to $121 million. [6]

Still from the Sweeping Curves device. This 10 second ident, shown on the TV broadcast shortly before the start of a race, culminates in the lines coming together to form the F1 logo, along with an FOM copyright notice.

[edit] Formula One Management

Formula One Management Ltd. controls the media distribution and promotion of content regarding Formula One. The Formula One website content is managed by Formula One Management. Financially, FOM provides partial investment for tracks and teams in order to establish Formula One where its popularity may not be well established. FOM maintains the commercial rights to the team names and all media content regarding Formula One. Coordination of planning and racing events are done with the Fédération Internationale de l'Automobile or FIA. In recent years, the FOM has had to step in and shut down many internet websites that make F1-related videos available for viewing and/or download online, due to this being in breach of their copyright laws. They also very regularly remove videos from free video sites such as YouTube under claims of copyright infringement.

The president of FOM is Bernie Ecclestone who has presided over the company since it has existed in its current form.

[edit] Formula One Licensing BV

Formula One Licensing BV owns the Formula One trademarks; the F1 logo, "Formula 1", "Formula One", "F1" and the "Sweeping Curves device" shown before Grands Prix.^[3]

[edit] Formula One Productions

Is part of the Formula One Management, its concerns itself with producing the race content of grand prix. It however does not include any commentary or pit side broadcasts, which are done by the production companies who own the rights - e.g. North One Television for the UK. They are based in Biggin Hill, just outside of London. The company also produce the end of year review DVDs.

[edit] Related companies

[edit] Allsport Management

Allsport Management SA is a Swiss registered company which manages the sale of almost all Formula One trackside advertising and the Formula One Paddock Club.

Allsport Management was founded by Paddy McNally who had begun to work with Bernie Ecclestone in the late 1970s. McNally, who was a former Marlboro sponsorship consultant, came up with a solution to "tidy up" trackside advertising; This solution was called "themed advertising" where one advertiser is given total exposure at one part of the track.^[11] This is in contrast to the Monaco Grand Prix, the only grand prix where Allsport is not involved, where space is sold such that multiple advertisers are visible in every picture. This is arguably less effective.^[11]

In 2006 Allsport Management (and the related Allsopp Parker & Marsh companies) were acquired by the Formula One Group.^[12] This deal, estimated to be worth $350m, simplified the formerly secretive structure of Formula One and means all the revenues from the sport are now paid directly into the Formula One Group.^[13]

[edit] Others

Other companies include Formula One Asset Management, Formula One World Championship Ltd., Formula One Productions Ltd. and Formula One World Travel Ltd.

[edit] References