Confirmed: Liberty Media to buy Formula One

US media giant confirms long-awaited buyout.

Confirmed: Liberty Media to buy Formula One

Liberty Media Corporation has confirmed it is to purchase Formula One, in a deal that values the motorsport series at US$4.4 billion.

The American media conglomerate publicly announced the long-awaited buyout on Wednesday following widespread reports that a deal was imminent.

Liberty will initially acquire an 18.7 per cent stake in Formula One from a consortium of sellers led by CVC Capital Partners, the controlling owners of the series, for US$746 million in cash. The company will then acquire 100 per cent of the shares held by Delta Topco, the parent company and ultimate owner of Formula One.

A Liberty statement said the transaction price 'represents an enterprise value for Formula One of US$8 billion and an equity value of US$4.4 billion.' A full takeover is expected to be completed in the coming months, possibly as early as the first quarter of 2017.

The deal, which comes after years of speculation and false dawns, will see Liberty assume US$4.1 billion of Formula One's existing debt. A debt instrument will also be issued that the sellers will be able to exchange into shares of Liberty Media Group tracking stock (LMCK).

After completion of the acquisition, Formula One will be assimilated into the Liberty Media Group, a divison of Liberty that will be renamed the Formula One Group. The consortium of sellers led by CVC will own approximately 65 per cent of the group's equity and will have board representation at Formula One, while a CVC representative will also join the Liberty Media board of directors.

Commenting in Wednesday's statement, Greg Maffei, the president and chief executive of Liberty Media, said: "We are excited to become part of Formula One. We think our long-term perspective and expertise with media and sports assets will allow us to be good stewards of Formula One and benefit fans, teams and our shareholders."

Following the deal, Chase Carey, the executive vice president of 21st Century Fox, will become the new chairman of Formula One. The American will replace Peter Brabeck-Letmathe, who has chaired the sport for the last two years. Brabeck-Letmathe will remain on the Formula One board as a non-executive director.  

"We think our long-term perspective and expertise with media and sports assets will allow us to be good stewards of Formula One."

"I greatly admire Formula One as a unique global sports entertainment franchise attracting hundreds of millions of fans each season from all around the world," Carey said in a statement. "I see great opportunity to help Formula One continue to develop and prosper for the benefit of the sport, fans, teams and investors alike."

Formula One chief executive Bernie Ecclestone, meanwhile, is set to stay on in his current role to aid the transition. In an interview with The Associated Press this week, the 85-year-old said: “After two or three years I will maybe take it easy a bit.”

Ecclestone, who has overseen the commercial development of Formula One for the past four decades, currently owns a 3.3 per cent stake in the sport, while his Bambino Trust has a further 8.4 per cent. After the Liberty takeover is closed, the shares will be reduced to 2.1 per cent and 5.4 per cent respectively.

"Bernie has been a wonderful CEO for us over the last ten years," said CVC co-chairman Donald Mackenzie. "There have been many successes and the occasional challenge but there has never been a dull moment and we have had a lot of fun.

Mackenzie added: "The combined skills of Chase and Bernie mean that the successes should continue and we wish them well. We would like to thank Peter Brabeck-Letmathe for his outstanding contribution during his tenure as chairman. His leadership has served the company well, and we are pleased that he will remain on the board as a non-executive director."

CVC, which will remain the largest shareholder in Formula One until the takeover is complete, owns a 38.1 per cent stake in the sport. Other shareholders include the US fund manager Waddell & Reed, which owns just over 20 per cent, and LBI Group, which holds 12.1 per cent.

CVC's shares will be reduced to 24.7 per cent once the deal is closed. Waddell & Reed will have a 13.3 per cent share, while LBI will hold onto 7.8 per cent. The remaining shares will be split between Norges, whose stake will reduce from 4.1 per cent to 2.7 per cent, F1 management, and other parties.

Liberty has said that all 11 teams 'will be given the opportunity to participate in the investment in Formula One'. The company added that 'the detailed terms of that investment will be agreed in due course', with certain teams having already shown interest in investing after completion of the acquisition.

Though it is expected to go through, the acquisition remains subject to certain conditions, including the receipt of certain clearances and approvals by antitrust and competition law authorities in various countries, and approval by third parties, including that of the Fédération Internationale de l'Automobile (FIA), the governing body of Formula One. 

Liberty Media, which owns the Atlanta Braves baseball team, is controlled by cable mogul John Malone. It currently holds significant stakes in Charter Communications, Sirius XM Radio and Live Nation Entertainment Company, as well as smaller investments in Viacom, Time Warner, Sprint Corporation and Barnes & Noble.

Liberty Global, the world's largest international TV and broadband company, operates in more than 30 countries across Europe, Latin America and the Caribbean. It owns numerous consumer media brands, including Virgin Media, Ziggo, Unitymedia, Telenet and UPC.