Lehman Brothers holds 15.3% of F1
If there were still any doubt that F1 is at the center of global financial stakes, here is further proof: Lehman Brothers still holds 15.3% of it, more than three years after its bankruptcy. It has committed to selling them within the next two years in order to repay its creditors.
The bankruptcy of the American investment bank in 2008 triggered the economic and financial crisis that the world is still experiencing. According to information from the Guardian, among the many assets on its balance sheet was a 15.3% stake in Delta Topco, the holding company that controls Formula One, making it the second-largest shareholder, behind CVC Capital.
This acquisition was made possible by another bankruptcy, that of the Kirch media conglomerate. Indeed, the bank had granted a loan to the then shareholder of F1, who was unable to repay it in 2002. The financial institution thus found itself owning the shares held by Kirch. In 2006, during the takeover by CVC Capital, Lehman had sold its shares before reversing its decision. It thus provided $550 million for a total loan of $2.8 billion used by the investment fund to purchase the discipline.
Obviously, when Lehman Brothers also found itself under the U.S. bankruptcy chapter, CVC Capital wanted to seize the shares in F1, according to Delta Topco’s bylaws, which require a shareholder to sell their shares at a fair price if they are no longer able to honor their debts. However, Lehman’s lawyers argued that they would be able to obtain more if these shares were sold separately. CVC agreed since Delta Tepco’s same bylaws stipulate that the investment fund has a veto right over the new owner of these shares held by Lehman Brothers. Therefore, it is not conceivable that an unwanted entity could sneak into the capital.
Nevertheless, the question of valuing this stake arises. Indeed, the Guardian claims that a senior official estimates Lehman Brothers could gain nearly $1.5 billion from it. For a 15% stake, this gives a total valuation of $10 billion. This amount seems astronomical given that the future of F1 is far from clear. There are thus two major uncertainties regarding the future of this sport.
The first issue is that the new Concorde Agreements have not yet been signed. These agreements govern all commercial rights related to F1, including the distribution among the various stakeholders. Even though, as usual, the teams are unlikely to proceed in unison since their association, the FOTA, has fallen apart with the departure of Ferrari and Red Bull. However, they might be able to secure more than the current 50% granted by Bernie Ecclestone. This would reduce the income going to shareholders, thereby mechanically decreasing the value of these shares.
The second unknown is obviously the succession of Bernie Ecclestone, who is now 81 years old. This transition seems all the more confusing since the recent resignation of David Campbell, who had been appointed head of Allsport, the structure that manages the Paddock Club and trackside advertising. When he was appointed in December 2010, he was considered a potential successor to the great financier of F1.
With the participation of RacingBusiness.fr
