Business View: Shunted out of the City
Investors see that sport is going nowhere fast
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Your support makes all the difference.By the time you read this, the 2003 Formula One season will have started in earnest. The Melbourne Grand Prix is usually quite a spectacle. But after the Lord Mayor's Show comes the garbage truck and even hardened fans of the sport may find it hard to get excited about another year of almost guaranteed success for Ferrari and Michael Schumacher.
Dull races will hardly lure the viewing public, and without big audiences the advertisers will not dig deep into their wallets. Given that tobacco, long a mainstay of F1 sponsorship, is being weeded out of the picture and the expected boost from pay-per-view digital TV has not materialised, the financial story for the sport is hardly compelling either.
About five years ago, Bernie Ecclestone tried to float his F1 business. When that failed, he raised about £1bn in a bond issue which Morgan Stanley had terrible trouble trying to sell to the investment community. He also raised cash by selling 75 per cent of his holding company, which passed though various people's hands until it ended up with the creditors of a German media company called EM.TV.
All this activity indicated that Mr Ecclestone, who is 73 this year, was thinking about retirement and building a nest egg for his wife and family. But at Melbourne you will see him as bouncy as Tigger, as pleased as Punch and as manipulative as Machiavelli.
In the pit lane, all the talk will be about changes to the rules to make F1 more interesting. But behind the scenes there are three business-related topics of debate: will Mr Ecclestone buy back the controlling interest in his holding company? Will the big motor manufacturers truly break away and form their own competition? And are the days of this fantastic money-making circus over?
If Mr Ecclestone can get it for the right price, he'll buy the business back, but it may be worth very little. I think the big motor manufacturers are playing for time in the expectation that Mr Ecclestone either retires or dies. As for the money, what is happening in F1 is replicated all through professional sport, where the financial dreams of a few years ago have not been realised.
And there is an interesting parallel between what is happening in F1 and what is going on at Manchester United.
There, two investors from the horse-racing world, JP McManus and John Magnier, have become the largest share- holders with over 10 per cent. The City is wondering about their interest, allied with a holding of nearly 10 per cent accumulated by three other wealthy individuals. The talk is of taking the company private and running it as a European-style sporting club. To be frank, it is a rather expensive plan, but if these people have deep pockets, then good luck to them.
It is more likely that a clutch of other quoted football clubs will go private first. Leeds United has been a disaster as a public company, both for investors and supporters. Newcastle United and Chelsea operate more like private companies than public ones. And why the likes of Charlton Athletic, Southampton, Aston Villa, Birmingham City bother with the £1m-a-year cost of being listed is beyond me.
The brief period when the City flirted with sports organisations and tried to turn them into businesses is over. Sport is too volatile and too unpredictable for institutional investors. It is the place for entrepreneurs with big egos and thick hides.
Mr Ecclestone is taking his spanner and spark plugs and going back to his garage. The final whistle will be blowing on football's game of two halves in the City. It was entertaining but ultimately there were few winners.
Osmond lets in the wrecking crew
A similar thing can be said for Hugh Osmond's tilt at Six Incompetents. His £5.6bn bid ran out of steam almost before it left the goods yard, and the undeserving pubs and hotels giant will win approval for its demerger on Wednesday. Mr Osmond will then have to eat humble pie if he is going to continue bidding, but his credibility will be shot.
Then there are about four weeks in which other rivals can come out of the woodwork before the split becomes fact. Even then, bidders such as Marriott or Hilton could go for the demerged companies, though I see little advantage in waiting.
Mr Osmond's bid was a little like the Charge of the Light Brigade – doomed to failure but leading to the ultimate destruction of its target by other means.
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