Bloomberg News

Mercedes Formula One Team Said to Reject CVC Offer of New Terms

March 29, 2012

Daimler AG’s Mercedes (DAIMLER) team rejected the terms of an initial offer from CVC Capital Partners Ltd. to remain in Formula One after this year, a person with direct knowledge of the situation said.

The auto-racing team is considering its options, including a legal challenge, after Sky News reported March 19 Ferrari SpA (FERI) and Red Bull GmbH’s entries would get higher signing-on fees to stay on through 2020, said the person, who declined to be identified because the matter is confidential.

The existing terms tying Mercedes to Formula One expire after this season, which ends on Nov. 25.

Formula One’s plan to raise cash with a debt refinancing and possible share sale could be undercut should series owner CVC fail to renew terms with all teams, according to Xander Heijnen, a partner of Munich-based CNC Communications & Network Consulting.

“CVC will want to do a deal with Mercedes as soon as possible to satisfy the financial markets,” said Heijnen, who has advised Formula 1 teams on strategy.

CVC bought Formula One in a buyout in 2005 and 2006, using $2.5 billion of loans. The London-based private-equity firm, which owns 63.4 percent of the series, is exploring a possible sale of a stake in an initial public offering, a person with knowledge of the matter said March 20.

CVC also began the process of extending its debt, which involves raising $2.27 billion of new credit facilities due in 2017 and 2018 to replace its existing $2.92 billion in loans due in 2013 and 2014, according to a March 27 statement.

Other Teams

Ferrari, Red Bull and McLaren, the top-three ranked teams last season, are among those that agreed to renew terms, series chief executive Bernie Ecclestone told Formula1.com on March 24, without giving further details. Mercedes finished fourth in the 12-team standings last season.

Stuttgart-based Daimler has owned the team, whose drivers include record seven-time champion Michael Schumacher, since November 2009 when it bought then champion Brawn Grand Prix with Abu Dhabi’s Aabar Investments PJSC. Mercedes had been a partner in the McLaren team for 14 years.

Mercedes team chief executive Nick Fry declined to comment about the negotiations with CVC. Ecclestone also declined to give details about the talks.

To contact the reporter on this story: Alex Duff in Madrid at aduff4@bloomberg.net

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net


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