Liberty Media aids F1 takeover with $1.55bn in third-party investment

US mass media company Liberty Media has today (Wednesday) unveiled details of an investment initiative worth $1.55bn (€1.45bn) which is designed to aid its takeover of the Formula One motor racing championship.

Liberty Media said it has entered into agreements with seven third party investment groups to commit $1.55 billion in subscriptions for newly issued shares of its Series C Liberty Media common stock (LMCK).

These entities are Coatue Management; the D. E. Shaw group; JANA Partners; Ruane, Cunniff & Goldfarb; Soroban Capital Partners; SPO Advisory Corp and Viking Global Investors. The issuance of the shares of LMCK to the group will be granted concurrently with the completion of the Formula One acquisition.

Liberty Media in September confirmed it had agreed a deal with a consortium led by private equity fund CVC Capital Partners to acquire Formula One. Liberty, which is owned by media mogul John Malone, paid $4.4bn to purchase an initial 18.7-per-cent stake in the series and is set to acquire the remaining shareholding in 2017. The agreement valued the series at $8bn.

Greg Maffei, president and chief executive of Liberty Media, said today: “This group shares our enthusiasm for the sport and our belief in the opportunity to develop and grow it for the benefit of the fans, teams, sponsors and our shareholders. We look forward to closing the transaction in early 2017.”

The proceeds from the $1.55bn investment will be used to increase the cash portion of the aggregate consideration payable to the consortium of selling Formula One shareholders led by CVC. As a result of this investment, the number of LMCK shares issuable to the selling shareholders at the closing of the takeover will be reduced from approximately 138 million to approximately 76 million.

The total number of LMCK shares to be issued by Liberty Media in connection with the acquisition of Formula One, to both the selling shareholders and the third party investors, remains unchanged at approximately 138 million shares. Upon completion of the acquisition, subject to stockholder approval, the Liberty Media Group will be renamed the Formula One Group.

Following the completion of the takeover and the issuance of shares to the third party investors, they will own approximately 26 per cent of Formula One Group’s equity. The selling shareholders will own approximately 39 per cent of the equity and will have board representation at Formula One to support Liberty Media in its plans for the sport. In addition, a CVC representative will be joining the Liberty Media board of directors.

Chase Carey, chairman of Formula One, added: “This is a significant step in Liberty Media's transformative acquisition of Formula One and is further confirmation that the future of the sport is bright.”

The takeover is still subject to a number of conditions, including clearances and approvals by antitrust and competition law authorities in various countries; backing from the International Automobile Federation (FIA), governing body of Formula One; and approval by Liberty Media’s stockholders of today’s announcement at a special meeting scheduled for January 17.

Liberty Media said the acquisition is expected to close before the end of the first quarter in 2017.