October 28, 2016

John Malone’s Liberty Media to Buy Formula One

Germany’s Sebastian Vettel drove during a practice session in Monza, Italy, on Sept. 2, before Formula One’s Italian Grand Prix. On Wednesday, Liberty Media Corp. said it agreed to buy the auto-racing franchise. | AFP

John Malone’s Liberty Media Corp. said it agreed to acquire Formula One in a cash-and-stock deal that values the auto-racing franchise at $4.4 billion.

Chase Carey, the former chief operating officer at 21st Century Fox Inc., will serve as chairman of Formula One, succeeding Peter Brabeck-Letmathe, who will remain on Formula One’s board. Bernie Ecclestone will remain Formula One’s CEO, and the organization will remain based in London.

Formula One stages races in cities from Monte Carlo to Kuala Lumpur. It markets lucrative television rights and sponsorships and negotiates contracts with venues and teams. CVC Capital Partners, a London-based private-equity firm, bought majority control of Formula One in 2006.

“There’s an opportunity to continue to build this business and take it to the next level,” Mr. Carey said on an investor call, noting that Formula One attracts large TV audiences and reaches favorable demographics for advertisers.

For Mr. Malone, the Formula One deal adds to a flurry of recent deal-making. A pioneer of cable TV, the 75-year-old has surged back onto the media scene in the past few years. In the U.S., he helped engineer Liberty-backed Charter Communications Inc.’s roughly $60 billion takeover of Time Warner Cable Inc. last year, and was a key player in the union of pay TV channel Starz with the studio Lions Gate Entertainment Corp. in June.

Mr. Malone has noted the leverage sports TV programmers have in the U.S. cable market, and the large share of the monthly cable bill that goes to networks such as ESPN.

Companies backed by Mr. Malone—including cable operator Liberty Global PLC and TV channel-owner Discovery Communications Inc.—have been aggressive in expanding overseas, especially in Europe, to chase growth outside the maturing U.S. market. Discovery also has been investing heavily in sports content abroad; last year, it completed a $1.1 billion acquisition of Eurosport, which airs everything from major tennis tournaments to the Olympics.

Lately, the risks of big international bets by U.S. media companies have been on display as the strong dollar has weighed on financial results for companies, such as Discovery. Liberty Media also owns stakes in companies including satellite-radio operator Sirius XM Holdings Inc. and the Atlanta Braves baseball team.

Liberty’s acquisition of Formula One is happening in two stages. In the first stage, it has acquired an 18.7% stake. It is aiming to acquire the rest in the first quarter of 2017, contingent on approval from antitrust regulators, Formula One’s regulatory body and other entities.

The complex deal involves Liberty paying in cash, newly issued shares and convertible debt. Formula One Group will own the racing business. Liberty Media shareholders will have a 35% ownership interest, while existing owners including CVC will have the remaining 65% interest.

CVC has considered selling Formula One in the past, but an agreement was never reached.

One complication was a trial that Formula One’s colorful founder Mr. Ecclestone faced in Germany related to charges of bribery and fraud. A court in 2014 dropped the case against Mr. Ecclestone in return for a payment of $100 million.

“Bernie has been a wonderful CEO for us,” Donald Mackenzie, co-Chairman of CVC, said in a statement. “There have been many successes and the occasional challenge but there has never been a dull moment.”

CVC has raised more than $70 billion from investors in the last two decades to buy companies around the world. Its assets range from Petco, a U.S. retailer of pet food and supplies, to Chinese restaurant chain Da Niang Dumplings.

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