Formula One takeover facing French investigation

France’s financial watchdog, the Parquet National Financier (PNF), is investigating the role played by the International Automobile Federation (FIA) in January’s takeover of the Formula One motor-racing series by US mass media company Liberty Media, according to the New York Times.

The US newspaper, citing two people familiar with the inquiry, said the PNF wants to establish whether the FIA, which is headquartered in Paris, had a conflict of interest when it cleared the deal, which was valued at around $8bn (€6.7bn) including debt.

The FIA, motorsport’s sanctioning body, has previously hit out at “inaccurately informed” and “malicious” reports concerning its role in the takeover of Formula One and told the Times: “We are entirely confident that any investigation would find that the F.I.A. has acted appropriately at all times, and we stand ready and willing to cooperate with any enquiries should any investigation be commenced or clarification sought by the appropriate authorities.”

The FIA, F1’s sanctioning body, on January 18 said that its World Motor Sport Council (WMSC) approved the change of commercial rights-holder for the motor racing series at an extraordinary meeting in Geneva.

The WMSC unanimously approved the change of control of Delta Topco – the holding company of the Formula One Group and therefore owner of the commercial rights of Formula One – from private equity firm CVC Capital Partners in favour of Liberty Media. The approval ultimately led to completion of the takeover days later.

The FIA held a one per cent shareholding in Delta Topco. As part of the sale by CVC to Liberty Media, and in line with the agreements between the FIA and the Formula One Group, the FIA said it would be “dragged along” in the sale process under the same conditions as CVC and all the other shareholders.

A number of parties have questioned this stake, among them the UK’s Serious Fraud Office. The so-called ‘Concorde Agreement’, which the FIA signed in 2013 in its sanctioning role, is the main bone of contention for critics of the takeover.

The Concorde Agreement is the contract which divides up the commercial revenues of the sport, including television rights and prize money, along with specifying technical regulations. It is due to expire in 2020, but the deal signed in 2013 allowed the FIA to benefit from an increase in annual payments for its role in the sport. 

The FIA also received a one-time $5m payment and was allowed to buy a one per cent stake in Formula One for around 100 times less than its true value. It could not disperse of this stake until CVC sold up, and with its interest having ended up valued at around $80m this has raised concerns over a conflict of interest in clearing the takeover.

Bernie Ecclestone, F1’s longtime chief executive who was ousted following the takeover, told the Times: “This is what they wanted in order for them to go along with it. A lot of things happen in business that if you look at it you can’t understand why it is allowed to happen. Somebody said to me there’s a problem. I think in the end people were part of it in France and they’ll have a look at these things if they think it’s wrong.”