JohnHKart
11-30-04, 07:19 PM
From the LA Times 29 Nov
Losing Control?
Bernie Ecclestone's longtime hold on Formula One is on the line in a battle being waged in a British court
By John Griffiths, Financial Times
LONDON — Only five weeks after Juan Pablo Montoya and his BMW-Williams took the last checkered flag of the Formula One motor-racing season, the sport is preparing for another bitterly fought contest in its long and storied history.
The duel in question is taking place not at Monaco, Monza or any of the sport's other famous circuits but in the considerably quieter confines of a British courtroom. At stake is control of Formula One, one of the world's wealthiest and most glamorous sports businesses.
The case being heard in London will determine whether Bernie Ecclestone, the 74-year-old racing promoter, maintains the iron grip he has kept on Formula One and its hundreds of millions of dollars in annual revenue for well over 20 years.
Two days of hearings on the validity of the appointment of two Formula One Holdings directors ended last week with Justice Andrew Park reserving his ruling until sometime in December. If the outcome is unfavorable to Ecclestone, his hold will start to be pried loose by a trio of banks and a group of carmakers disgruntled with his methods and manner. There is even a possibility of Formula One splitting into two rival championships.
The direction the sport takes is a matter of considerable importance to a much wider world than Formula One itself. The sport enjoys huge international appeal; more than 800 million people watched broadcasts of one of this year's 17 races, said Kevin Alavy, an analyst with media monitor Initiative. To that must be added billions more "incidental" viewings in features or in newscasts.
At first sight, there appears little prospect of the sport's future being put at risk by the seemingly arcane, even trivial, suit on which Park is being asked to rule. It concerns two directors appointed to one of the complex web of companies founded by Ecclestone to control Formula One.
However, if the three banks bringing the suit — Bayerische Landesbank, J.P. Morgan Chase & Co. and Lehman Bros. Holdings Inc. — convince the judge of their case, they will dominate Formula One's board. They would then be well on their way to controlling two key operating subsidiaries, Formula One Administration and Formula One Management, through which Ecclestone has run things on a daily basis. The banks already own a 75% stake in SLEC Holdings, the parent of all the Formula One businesses and formerly owned outright by Ecclestone and his Bambino family trust.
Why should three banks come to play such a pivotal role in Formula One? They put up $1.6 billion to finance the purchase by Kirch, the German media group, of the SLEC stake. When Kirch collapsed in 2002, they became owners by default.
Under the terms of the original sale of the SLEC stake to Kirch, however, Ecclestone retained management control through FOA and FOM. The banks have had no say in running the Formula One business.
That would not be such a problem except that a dispute between Ecclestone and the carmakers taking part in Formula One has led to the possibility of the manufacturers breaking away and starting their own championship.
The carmakers have become exasperated by what they regard as the outdated, dictatorial manner in which Ecclestone runs Formula One and the unfair share of the revenue received by the businesses he founded.
Three years ago five carmakers — DaimlerChrysler, Fiat, Renault, BMW and Ford Motor Co. (which is no longer part of Formula One after the sale of Jaguar Racing) — took the first step toward establishing what they said would be a successful rival world championship. Set to start in 2008, the Grand Prix World Championship series would guarantee that a much larger portion of revenue went to the competing teams.
Offered such a substantial financial carrot, most of Formula One's teams have already signed up to the new championship in principle, even though it would not be able to use the term Formula One: Ecclestone bought 100-year rights to the name for $350 million several years ago.
With the big teams gone and Formula One collapsing, carmakers contend, SLEC and the banks' stake in it — along with the 25% held by Ecclestone's family trust — would quickly become worthless. For the banks concerned, such a setback would be embarrassing and hard to explain to shareholders.
Victory for the banks in the current court case, therefore, would almost certainly lead them to forge an alliance with the big carmakers taking part in Formula One and concede to demands that a bigger share of income to be directed toward the teams, potentially leaving Ecclestone sidelined.
In last week's hearings, the banks argued that Bambino's appointment of Luc and Emanuelle Argand, two Swiss nationals, to Formula One Holding's board two years ago after the sale to Kirch was a step too far and illegitimate in that it denied the banks control of businesses that they majority own.
It is a stance rejected by Ecclestone. Formula One's commercial rights, he contends, are owned not by SLEC but FOA and FOM.
Losing Control?
Bernie Ecclestone's longtime hold on Formula One is on the line in a battle being waged in a British court
By John Griffiths, Financial Times
LONDON — Only five weeks after Juan Pablo Montoya and his BMW-Williams took the last checkered flag of the Formula One motor-racing season, the sport is preparing for another bitterly fought contest in its long and storied history.
The duel in question is taking place not at Monaco, Monza or any of the sport's other famous circuits but in the considerably quieter confines of a British courtroom. At stake is control of Formula One, one of the world's wealthiest and most glamorous sports businesses.
The case being heard in London will determine whether Bernie Ecclestone, the 74-year-old racing promoter, maintains the iron grip he has kept on Formula One and its hundreds of millions of dollars in annual revenue for well over 20 years.
Two days of hearings on the validity of the appointment of two Formula One Holdings directors ended last week with Justice Andrew Park reserving his ruling until sometime in December. If the outcome is unfavorable to Ecclestone, his hold will start to be pried loose by a trio of banks and a group of carmakers disgruntled with his methods and manner. There is even a possibility of Formula One splitting into two rival championships.
The direction the sport takes is a matter of considerable importance to a much wider world than Formula One itself. The sport enjoys huge international appeal; more than 800 million people watched broadcasts of one of this year's 17 races, said Kevin Alavy, an analyst with media monitor Initiative. To that must be added billions more "incidental" viewings in features or in newscasts.
At first sight, there appears little prospect of the sport's future being put at risk by the seemingly arcane, even trivial, suit on which Park is being asked to rule. It concerns two directors appointed to one of the complex web of companies founded by Ecclestone to control Formula One.
However, if the three banks bringing the suit — Bayerische Landesbank, J.P. Morgan Chase & Co. and Lehman Bros. Holdings Inc. — convince the judge of their case, they will dominate Formula One's board. They would then be well on their way to controlling two key operating subsidiaries, Formula One Administration and Formula One Management, through which Ecclestone has run things on a daily basis. The banks already own a 75% stake in SLEC Holdings, the parent of all the Formula One businesses and formerly owned outright by Ecclestone and his Bambino family trust.
Why should three banks come to play such a pivotal role in Formula One? They put up $1.6 billion to finance the purchase by Kirch, the German media group, of the SLEC stake. When Kirch collapsed in 2002, they became owners by default.
Under the terms of the original sale of the SLEC stake to Kirch, however, Ecclestone retained management control through FOA and FOM. The banks have had no say in running the Formula One business.
That would not be such a problem except that a dispute between Ecclestone and the carmakers taking part in Formula One has led to the possibility of the manufacturers breaking away and starting their own championship.
The carmakers have become exasperated by what they regard as the outdated, dictatorial manner in which Ecclestone runs Formula One and the unfair share of the revenue received by the businesses he founded.
Three years ago five carmakers — DaimlerChrysler, Fiat, Renault, BMW and Ford Motor Co. (which is no longer part of Formula One after the sale of Jaguar Racing) — took the first step toward establishing what they said would be a successful rival world championship. Set to start in 2008, the Grand Prix World Championship series would guarantee that a much larger portion of revenue went to the competing teams.
Offered such a substantial financial carrot, most of Formula One's teams have already signed up to the new championship in principle, even though it would not be able to use the term Formula One: Ecclestone bought 100-year rights to the name for $350 million several years ago.
With the big teams gone and Formula One collapsing, carmakers contend, SLEC and the banks' stake in it — along with the 25% held by Ecclestone's family trust — would quickly become worthless. For the banks concerned, such a setback would be embarrassing and hard to explain to shareholders.
Victory for the banks in the current court case, therefore, would almost certainly lead them to forge an alliance with the big carmakers taking part in Formula One and concede to demands that a bigger share of income to be directed toward the teams, potentially leaving Ecclestone sidelined.
In last week's hearings, the banks argued that Bambino's appointment of Luc and Emanuelle Argand, two Swiss nationals, to Formula One Holding's board two years ago after the sale to Kirch was a step too far and illegitimate in that it denied the banks control of businesses that they majority own.
It is a stance rejected by Ecclestone. Formula One's commercial rights, he contends, are owned not by SLEC but FOA and FOM.