Liberty Media has raised its stake n Formula One by 0.47% to 19.1% through investing $13 million in the auto racing series that is agreed to take over for $4.4 billion.
The take over is far from the finish line as it finishes a number of hurdles including a severe conflict of interest as F1's regulator, the Federation International de l'Automobile (FIA) needs to deal and stand to make $44 million as a result.
The $4.4 billion purchase price compromise $1.1 billion in cash with the remainder coming from shares in Liberty Media which is listed on Nasdaq and owns stakes in companies such as Time Warner, Viacom, and event promoter Live Nation.
The 0.4% stake was acquired last October 27 but Liberty agreed to buy it in September $746 million cash for an 18.7% stake in F1's parent company Delta Topco.
The $746 million was funded with cash and borrowings including the sale of debentures which are convertible into Time Warner stock. This raised $445 million whilst Liberty's cash in the bank has reversed by $334 million.
Despite being majority owned by billionaire John Malone, Liberty is far from being awash with cash. Liberty will only have $104 million in the bank if the takeover closes. Its limited resources are highlighted by the fact that it has not even funded the $746 million from its reserves.
In 2012 Waddell invested $1.6 billion in Delta Topco to give it a 20.5% stake and by the time that Liberty agreed to buy the company it had only made a $644.7 million return. Waddell's total cash return to $942.2 million at most which is $657.8 million less than it paid to invest.
It is clear that Liberty intends to buy the FIA's 1% stake as its investment presentation reveals on page 17 that it "has agreed to acquire all outstanding shares of Delta Topco." So, in summary, if the FIA approves the sale of F1 it will make a $43.5 million profit and this has fueled the suggestion that it is a conflict of interest.
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