24/07/2011
NEWS STORY
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You've got to hand it to Sky News. The channel is owned by broadcaster BSkyB, which in turn is controlled by Rupert Murdoch's News Corporation through its 39.9% shareholding.
Over the past few weeks as a result of the phone hacking scandal engulfing News Corp the company has been forced to drop its bid for the remaining 60.1% of BSkyB. As a spokesperson for UK Prime Minister David Cameron said, News Corp should instead "focus on clearing up the mess and getting its own house in order."
It all makes sense given the chaos which currently surrounds News Corp so it put a wide smile on the face of Pitpass' business editor Christian Sylt when he read a recent post by Sky News blogger Mark Kleinman which 'exclusively' reveals yet another "key player...working with News Corporation and Exor, the Italian firm which controls Fiat, on their interest in acquiring F1."
Yes, that's right, even though News Corp has been forced to drop its bid for a company it already controls, Sky News is still talking about it buying another business. This of course is despite the fact that in the three months since Sky News first promoted the idea, News Corp has not even made a bid for F1.
We shouldn't also forget that F1's majority owner CVC has told News Corp's deputy chief operating officer James Murdoch that F1 is "not currently for sale." This is of course the same James Murdoch who, as Pitpass reported, recently revealed that he isn't aware of who F1's chairman is. It is also the same James Murdoch who MP Tom Watson said he is reporting to Scotland Yard over allegedly giving false evidence about the phone hacking scandal to the Culture, Media and Sport Committee at the House of Commons earlier this week.
Indeed it is the same James Murdoch who was believed to have been driving the phantom F1 bid but has been called on, by MP Chris Bryant, to be suspended from his News Corp role. In his letter to News Corp's non-executive directors, Bryant said there had been a "complete failure to tackle the original criminality at the company" and "the lackadaisical approach to such matters would suggest that there is no proper corporate governance within the company."
Some observers have suggested that News Corp could be forced to cut its holding in BSkyB to below a controlling 29.9% level, or even down to zero, as a result of the scandal. In short, News Corp could be forced to sell its own company (let alone be prevented from buying more of it) but if we take Sky News' latest F1 tidbit at face value, we are told that it is regardless planning to buy F1.
There has been a string of stories from Kleinman about parties allegedly working with News Corp on an F1 bid - from boutique investment banks to billionaires and now a private equity executive called Scott Lanphere who was a director at investment firm Morgan Grenfell which bought 12.5% of F1's parent company SLEC in 1999. The only one of these "key players" which has actually come forward and confirmed it is involved with News Corp in connection with F1 is the Exor investment fund which ultimately owns a stake in Ferrari.
However, even Exor didn't say that it is considering whether to bid for F1 (let alone actually make a bid). Instead it said it and News Corp "are in the early stages of exploring the possibility of creating a consortium with a view to formulating a long-term plan for the development of Formula One in the interests of the participants and the fans." This statement may well contain so much waffle that it would satisfy a hungry Belgian but it certainly does not say that Exor or News Corp are even considering buying F1.
As Pitpass has also reported a representative of an investment bank which works with News Corp has said that the media company bizarrely thought that the involvement of Exor would add credibility to its position. If true this is yet more evidence of how little News Corp understands about F1 because there is good reason why the sport's teams might not want to race in an Exor-owned F1. The teams frequently vocalise concerns that Ferrari is given preferential treatment so the last thing they would want is it being the only outfit to be connected to F1's owners.
It is far from the only reason why News Corp's phantom bid has no life. Pitpass has written on this extensively so there is no point in going over the arguments again. Readers wanting to recap on the key details can find them here, here and here. To be clear, these articles were written before the hacking scandal brought News Corp's newspaper division to its knees. The point to take from this is that the phantom bid was previously at best vaporous but in the wake of the hacking scandal it is well and truly dead.
F1 sports blogger Joe Saward gave more favourable coverage to the possibility of a News Corp F1 bid than many other journalists. He also held out his support longer than most but even he has given in to the inevitable and realised that the hacking scandal has killed it stone dead. "The scandal is significant for the Formula 1 world as it means that the much-rumoured bid to buy the Formula One group from CVC Capital Partners in unlikely to go ahead," wrote Saward adding that "the scandal will blow that project out of the water."
Indeed, whilst the teams' opposition to racing in an Exor-owned series would be strong, it is nothing compared to the roadblock which a News Corp-owned F1 would face. News Corp is one of the world's most publicly disgraced and reviled companies at the moment and it is hard to imagine that F1's stakeholders would want it darkening its door.
Writing in the Telegraph Sylt recently quoted Ecclestone saying that "if [News Corp] were to bid for F1 they might find that people would object to it." This was a rare occasion of understatement from F1's boss. Any takeover of F1 would require the consent of the sport's governing body the Fédération Internationale de l'Automobile (FIA) and as Pitpass has already reported, its former president Max Mosley has said he doesn't believe News Corp would make a fit and proper owner of the sport. It's no surprise since the now-closed News Corp newspaper, which sparked the phone hacking allegations, ran an exposé on Mosley in 2008. But that's not all.
Whilst News Corp was busy destroying its credibility F1's top circuits all became unified and, as Pitpass has reported, they may well oppose a News Corp takeover of F1. If they refuse to host F1 races there is next to no sport for News Corp to take over. Pitpass has also explained in detail why the European Commission was already likely to oppose a News Corp F1 takeover regardless of the hacking scandal. Next come the teams. The Concorde Agreement, the contract committing the teams to race in F1, expires at the end of next year so the teams have a viable exit route if they refuse to race under News Corp.
Having F1 owned by Exor would be bad enough for the teams (except for Ferrari) but having News Corp involved too could be even worse. This sentiment has already been conveyed by Martin Whitmarsh, chairman of the Formula One Teams Association (FOTA), who recently said "there are new suitors, whatever, but we think we are better off working with the partners that we have. Bernie (Ecclestone) knows the sport and has done many great things for the sport, CVC are the owners, so we have got to be respectful... I think it is better to find good and constructive ways of working together, rather than saying, 'Oh, here is someone new, whom we don't know, who wants to buy the sport so let's rush off in that direction'. In my view that would be the wrong thing to do.... News Corp is a 20 billion or whatever turnover news corporation, so I am sure they will remain a big player. But I don't think that Formula One needs to rush into their arms."
It is no surprise that the teams don't want to rush into News Corp's arms given how despicably some of the executives working for its companies have behaved. Even Kleinman admits that its "efforts to assemble a credible bid, which I disclosed earlier this year, have obviously been hit by the phone-hacking scandal which has hit News Corp and its UK newspaper subsidiary, News International."
Kleinman's first article about News Corp's phantom bid contained the clear caveat that "there is a good chance that News Corp's deliberations and talks with outside partners will not ultimately lead to a bid." It also added that "participating in a consortium that would buy F1 is only one of several options that News Corp is examining in relation to the sport, which may come up for sale during the next 18 months." However, Kleinman's latest blog post now states that "it's not clear whether News Corp intends to pursue its interest in F1 during the roughly 18 months remaining of the current Concorde agreement."
This fits with Pitpass' analysis that it is much more likely that F1 will be sold by CVC nearer to 2014 when its debt is almost clear. However, if what Sky News is saying is that News Corp may not make a bid for 18 months then one has to wonder whether its readers get any real benefit from it speculating about it now. Bearing this in mind, it is not surprising that the print media seems tired of Sky News' occasional tidbits of F1 news as they have hardly been covered since the initial news about News Corp's interest.
It would of course be really interesting news if, shock horror, News Corp made an actual bid for F1. Pitpass has already suggested that News Corp may do just that once (if) the scandal calms down simply to give the media something else to write about the company other than phone hacking. Some journalists may well welcome the opportunity to write about something News Corp-related which isn't to do with hacking.
Indeed, on his twitter page on 18 July Kleinman wrote that he "will be diverting attention from News Corp/hacking on tonight's @JeffRandallLive with some exclusive news about the UK banking industry." The problem is that if News Corp tries to make a bid for F1 to divert attention from hacking then it will be easily dismissed for all the reasons above, chief of which is that, to use Ecclestone's wonderful understatement, "people would object to it."
All this talk of News Corp buying new businesses, despite it struggling to increase its investment in its existing assets, sure gives a nice glow to a company which has had around $5.8bn wiped off its market capitalisation in the past two weeks. However, since News Corp has not even made a bid for F1 it could be argued that this isn't exactly the most important news in the sport right at the moment.
Given the awful stigma attached to anything News Corp-related, perhaps Lanphere would be best off trying to buy the company's plans for F1 domination and get together with Raine and its other alleged partners to make a bid without the media company. Lanphere and Raine are both customers of Sylt's Formula Money F1 research firm but he stresses that inside knowledge has not driven this suggestion.
Nevertheless, it would seem to make sense because the way things are looking, it would seem more likely that Kleinman will end up with a new paymaster, because News Corp has been forced to sell its BSkyB shares, than that Ecclestone will have a new boss because CVC sells F1 to News Corp.