• The Inside Line

A new owner for F1?

ESPN Staff
February 5, 2014
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In the world of the super-rich, everyone's connected. And John Malone, the American media mogul currently said to be interested in acquiring CVC Capital Partners' stake in Formula One, is no exception.

While CEO of Tele-Communications Inc (TCI), Malone worked with one Leo Hindery, currently promoter of the forthcoming - eventually - New Jersey Grand Prix. And over the decades spent doing deals in the world of cable television Malone was often at loggerheads with Rupert Murdoch, a fellow TV mogul who has harboured ambitions of F1 ownership.

In 2005, Malone bought a 32 percent stake in News Corp - half of which were voting shares - in what was a hostile but legal move that eventually saw Malone and Murdoch trade the News Corp shares for the DirecTV satellite network in a tax-free deal. It was a loss of face for Murdoch, who had spent six years fighting to acquire DirecTV.

As a businessman, Malone sounds like the kind of man Bernie Ecclestone would approve of. Both men found the lure of profits and negotiations alluring from an early age, earning money while their peers were otherwise occupied with the whimsy of childhood. Both men are responsible for growing businesses they did not create while negotiating the sort of contracts that led to untold riches both personal and corporate. Both have an aversion to tax.

The past year has been a busy one for Malone. After several years in semi-retirement the man the business pages call the Cable Cowboy has come out with all guns blazing, and has acquired or is bidding for an expansive portfolio of media properties.

From Forbes: "Cable and telecom giant Liberty Global, which Malone chairs, completed its acquisition of British cable company Virgin Media in June. The cash and stock deal was worth $24 billion and added 25 million customers in 12 European countries. In May, TV programming distributor Liberty Media (also chaired by Malone) completed a deal to buy a 27% stake in cable operator Charter Communications, putting Malone back in the cable TV business. ... Earlier in 2013, Liberty Media completed the spin-off of its Starz Entertainment group as a separate company and the FCC approved the takeover of Sirius XM Radio by Liberty Media."

Malone's recent flurry of deals has already had industry watchers talking about the media mogul's likely end game. In a scant 24 days in January, Malone and the companies he controls made "commitments and overtures totalling more than $75 billion, including a $10.6 billion offer for the 48% of satellite radio company Sirius that Liberty Media doesn't already own; a $61.3-billion bid, via Charter Communications for Time Warner Cable, the nation's No. 2 cable provider; and $13.7 billion for the 71.5% stake in Dutch cable provider Ziggo that Liberty Global doesn't already own," CNN Money reported.

Malone was buying - or looking to buy - both content and network infrastructure. The possible acquisition of Formula One dovetails nicely with that plan. Through an existing stake in Discovery Communications, Malone has acquired EuroSport, and he may be interested in using that channel as an F1 platform further down the line. As a key stakeholder in US cable infrastructure, control over a sizeable F1 stake would give Malone considerable influence in the pricing and sale of broadcasting rights and licenses.

And therein lies the potential rub. While Formula One has proven to be a profitable venture for the CVC investment fund, an investment fund is there solely to make money. Malone's other purchases all point to the targeted acquisition of companies that can supply either physical infrastructure for the growing digital market, or those that can generate content to be sold via that infrastructure. F1 produces some high-value content, but doesn't quite fit the portfolio.

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