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SBD Global/June 26, 2012/Finance

CVC Sees Strong Return On F1 Investment

Private equity firm CVC is set to make a return of more than 600% from its $1B investment in F1 motor racing, according to Sylt & Reid of the London TELEGRAPH. It would make F1 "one of the most successful" private equity deals ever, regardless of whether it goes ahead with a planned flotation on the Singapore stock exchange. CVC is the largest shareholder in F1's parent company, Delta Topco. Over the past six months, however, it has "cut its stake by around half" to 35.5%. Through selling just 28.3% of F1, CVC has already made $2.1B. That is "far more than it paid to buy the business." CVS purchased F1 in '06 with $1.1B of debt from the Royal Bank of Scotland and a loan of around $965M from its investment Fund IV. Private equity firms "are not renowned for building up businesses, but this is exactly what has happened" since CVC took over F1. To "ease the gridlock" with the teams, F1 boss Bernie Ecclestone "brought all of F1's key companies under one roof." CVC purchased F1's trackside advertising and corporate hospitality divisions, then acquired the sport's feeder GP2 and set up GP3, a "grassroots entry level series" where annual team budgets are around $2M compared to $180M in F1 (TELEGRAPH, 6/24).
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