Liberty Media Corporation LMCA has agreed to purchase the Formula One Group – the highest class of single-seat auto racing in the world endorsed by the Fédération Internationale de l'Automobile (“FIA”). As per the deal, Liberty Media Corp. is set for a two-phase takeover of the Formula One Group with an aggregate payment of $8 billion. In the first phase, the company will purchase a minority stake. Then, it will take full control of Formula One. The company will then be integrated into Liberty Media Corp. Notably, Liberty Media Corp. is controlled by American business tycoon John Malone.
The Deal in Details
As part of the agreement, Liberty Media immediately acquired an 18.7% interest in Delta Topco – the parent company of Formula One for $746 million. The rest of the amount will be paid to the existing shareholders in $3.3 billion-worth newly issued shares of Liberty Media and in a cash consideration of $354 million.
Additionally, Liberty Media will also take over the current debt of Delta Topco which is valued at $3.6 billion. Notably, Delta Topco will be renamed as Formula One Group. Although 65% of the equity value will be held by the existing shareholders of the company, Liberty Media will have controlling rights. Bernie Ecclestone – CEO of Formula One Management Group – will continue in his role post deal. However, the Formula One chief has agreed to sell his stake in the group as part of the deal.
Back in 2014, Liberty Global plc LBTYA – a company also owned by John Malone, along with Discovery Communications Inc. DISCA unsuccessfully tried to acquire a 49% stake in Formula One. Moreover, a number of private equity firms and investment groups, namely Silver Lake Partners and Qatar Sports Investments, had reportedly shown interest in Formula One.
Boasting the highest class of auto racing in the world, Formula One is popular and followed globally not only by motorsports fans, but also by wealthy individuals. This makes the sport a great value proposition for pay-TV operators. Thus, Liberty Media can benefit from a stake in Formula One through increased revenues from the same. Additionally, Liberty Interactive Corporation’s QVCA subsidiaries like QVC can benefit from the online sales of Formula One related merchandise.
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Liberty Media Corporation presently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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