German bank’s £500m blunder over F1 shares

Christian Sylt
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ONE of Germany’s most bailed-out banks turned down the chance to make hundreds of millions of pounds in profits by buying a 10 per cent stake in Formula One at a bargain price of £63.3m ($100m), according to recently released legal filings.

The purchase would have yielded a profit of more than £500m for German bank BayernLB and cancelled out losses it had already made on an involvement with F1. It would have also helped the bank to repay some of the £8.6bn in state aid it received in 2008 when it ran into trouble during the recession.

BayernLB owned 46.7 per cent of F1’s parent company SLEC until 2005 when it sold the stake to current owner, private equity firm CVC. On 19 September 2005 CVC made a written offer to BayernLB for the bank’s shares and the 25 per cent stake then owned by Bambino, the family trust of F1 boss Bernie Ecclestone.

Its offer letter said: “I am pleased to set out below a proposed offer under which a new company (‘Newco’) formed by CVC Capital Partners Limited will... buy the whole of your interests in Formula One... The proposed offer for your combined holdings of 71.65 per cent of SLEC is $1.5bn... As a condition of this offer Bambino or the Ecclestone family will reinvest at completion $100m into the share capital of Newco for a 10 per cent stake... BayernLB may also invest $100m at completion in Newco for a 10 per cent stake.”

F1 was at risk of collapsing in 2005 due to a pay dispute with the teams so BayernLB decided not to reinvest, but had it done so it would have made a profit of £506.2m.

Over the past year CVC has sold a total of 28.3 per cent of F1, the most recent buyer being US investment fund Waddell & Reed in June. It paid £316.4m ($500m) for a seven per cent stake, which gave F1 an enterprise value of £5.7bn, taking into account its £1.2bn of debt.

The offer letter was lodged at the end of January as evidence in a lawsuit brought against CVC, BayernLB and Ecclestone in the New York Supreme Court by Bluewaters Communications.