Archer To Sell V8SC Back To The Teams???

[GTRMagic]

Interesting article in AA this week by Mr Fogarty, suggesting that a small gathering of team owners have apparently been forming unlikely coalitions in order to get a bid up to buy V8SC back from Archer Capital.

Mr Fogarty suggests in the article that Mr Cochrane is included in just such a syndicate, to lead the sport back from what the teams have been described in the article as being as a period of wrong decisions and an income-free zone.

To me, the article isnt on the front page of AA, or referenced there.. which suggests that perhaps it is more fanciful than grounded in executable potential.. and that the article is combined with a spiel about how the existing V8SC team directors are shopping Mr Warburton's name around as a way forward for the leadership of the series as kind of burying it with the other story...

But it does beg the question...

Is this thing actually possible?

Is the relationship with Archer in such a state that they want to eject them from the ivory tower and bring back the old guard?



The teams are well known to bleat and moan almost every week that they have no budgets to go racing, and here is something that would likely cost them, should they choose to participate, somewhere around $6.5m per REC in order for Archer Capital to get its buy price back...



Of interest in yesterday's Financial Review was a 2 page article around one of Archer Capital's sale attempts of IT company MYOB, and how their deal with Sage in the UK apparently fell over at the 11th hour. The article explains that Archer is apparently taking Sage to court over the inability to consummate what they considered a done deal... claiming damages equivalent to at least the difference between the price from Sage, and the (much lower) price they got from Bain Capital for that business.

This suggests perhaps that a buy-back price from Archer may be north of the $180m they are reported to have paid for their share of V8SC.. especially if you take into account any lost income from the couple of years these blokes and blokettes have been inc harge

...which theoretically increases the share price per REC holder...



Which in any terms is a shedload of dollars...

Presumably the teams and their consortium would they would still need to take on a commercial funding partner, like an Archer but without the operational control/majority ownership, to execute such a bold plan.

There has been some noise around this possibility for more than a little while, suggesting that Ms Klimenko-Saunders has been included in just such a scenario as arguably being capable of sourcing at least some of the funds required to take V8SC back to the racers. Most of such chat was put in the pile of "wouldn't it be good if..." and wasnt given much credence.

Maybe it should now...

Presuming any of this actually happened

[peckstar]

I suggested this a few weeks ago

Its amazing the amount of news articles that appear after someone makes a comment in a forum

[ForumNick]

Originally Posted by peckstar

I suggested this a few weeks ago

Its amazing the amount of news articles that appear after someone makes a comment in a forum

seen this forum's header ?

[peckstar]

Originally Posted by ForumNick

seen this forum's header ?

ten tenths 27 April New CEO thread . Happy

[D.R.T.]

Originally Posted by GTRMagic

to lead the sport back from what the teams have been described in the article as being as a period of wrong decisions and an income-free zone.

Do the team remember that they were involved in this period of decision making and were fully aware of what that they were selling a large stake in future income?

[eduardo1]

Yep D.R.T.

Teams were convinced that the shortfall in percentage of revenue they got would be offset (at least partially) by an exponential rise in the TV rights and other revenue streams.

That obviously hasn't happened.

Some teams were quite clever - they parked the payout in an investment fund and are using interest and dividends to as a cash flow measure to keep them afloat without touching the principal.

Others have cashed out while others used it to pay off debts.

In answer to GTR's original post - anything is possible, but highly unlikely for the simple fact that it would be near impossible for all the teams to raise the money equally.

However, the teams already own 25%. They could collectively buy the other 25% - they should be able to afford that. You could then have a consortium of rich motorsport people purchasing the other 50% with options each way to purchase at future dates.

People like Terry Morris, the Quinns, Lindsay Fox, even Betty and Roland (although conflicts of interest abound with the last two) would collectively have the means, especially as the shares are heavily devalued now (based on TC's recent sale).

Or, and what might be better for the teams - would be to cash out entirely, have the new owners (Archer or others) simply pay them a base appearance fee plus more on a sliding scale based on revenue rather than being completely revenue based income. It's no longer their problem as much and they are paid entertainers.

[Trevor]

sell it for $100m, by it back for $20m, sounds like a deal to me

BTW, numbers are fictitious, just added for emphasis

[peckstar]

Originally Posted by GTRMagic

...

The teams are well known to bleat and moan almost every week that they have no budgets to go racing, and here is something that would likely cost them, should they choose to participate, somewhere around $6.5m per REC in order for Archer Capital to get its buy price back...



Of interest in yesterday's Financial Review was a 2 page article around one of Archer Capital's sale attempts of IT company MYOB, and how their deal with Sage in the UK apparently fell over at the 11th hour. The article explains that Archer is apparently taking Sage to court over the inability to consummate what they considered a done deal... claiming damages equivalent to at least the difference between the price from Sage, and the (much lower) price they got from Bain Capital for that business.

This suggests perhaps that a buy-back price from Archer may be north of the $180m they are reported to have paid for their share of V8SC.. especially if you take into account any lost income from the couple of years these blokes and blokettes have been inc harge

...which theoretically increases the share price per REC holder...

I've seen no basis to suggest that the price would go up (North of $180M)

surely all the evidence suggest that the value has decreased, smaller TV contract, lack of key sponsors, shareholder selling out at lower price.

isnt it more likely that Archer may offload the product at a lower price, thus Trev's example

[rik]

Originally Posted by peckstar

surely all the evidence suggest that the value has decreased, smaller TV contract, lack of key sponsors, shareholder selling out at lower price.

isnt it more likely that Archer may offload the product at a lower price, thus Trev's example

Correct. You'd have to very foolish to pay Archer more than the $180m paid when the business was generating much higher revenues and profits.

The real question is whether Archer are prepared to sell now at a loss OR hang in with the hope of a new TV deal bringing them a profit.

Team owners who have not blown their cash could be in a very good position to negotiate.

[Tourer]

Originally Posted by rik

Correct. You'd have to very foolish to pay Archer more than the $180m paid when the business was generating much higher revenues and profits.

The real question is whether Archer are prepared to sell now at a loss OR hang in with the hope of a new TV deal bringing them a profit.

Team owners who have not blown their cash could be in a very good position to negotiate.

Agree - can't see Archer being able to justify a higher price than they paid because the income they've generated has been way less than the income the previous administration generated.

May well be that Archer are starting to realise that there's way more to this running a professional sport than meets the eye and that a loss now might appeal more than a potential large ongoing spend and future losses while they work out the best structure to run a pro sport and actually then run it and get the business going forward.

Agree with you Trev & Pecky in that regard.

Must admit that the article DOES sound fanciful but you never know, might just be real (or at least real that there have been discussions).

[MattV]

Originally Posted by Trevor

sell it for $100m, by it back for $20m, sounds like a deal to me

BTW, numbers are fictitious, just added for emphasis

You only get one Alan Bond in your life....

[GTRMagic]

As my original post in this thread suggested, Archer isnt backwards in coming forward when they think a deal they have done has turned turtle at not their own hand... hence a potentially higher valuation...

What did S&EL do with their bagatelle... is a $100m to $20m a possibility with them back at the helm?

Presuming any of this actually happened

[D.R.T.]

Originally Posted by Tourer

May well be that Archer are starting to realise that there's way more to this running a professional sport than meets the eye and that a loss now might appeal more than a potential large ongoing spend and future losses while they work out the best structure to run a pro sport and actually then run it and get the business going forward.

I think Archer is starting to realise that the previous business plan and strategy that they bought into wasnt sustainable.

[rik]

Originally Posted by GTRMagic

What did S&EL do with their bagatelle... is a $100m to $20m a possibility with them back at the helm?

I reckon they'd be back in with TC in a flash if the price was right... Plus a few team owners with capital.

Cocho must still be spewing he didn't take all cash!

[Tourer]

Originally Posted by D.R.T.

I think Archer is starting to realise that the previous business plan and strategy that they bought into wasnt sustainable.

Certainly not sustainable the way they've been running it. Taking over an entrepreneurial style organisation and not setting up a structure from the outset to convert that to a more corporate structure and focus on looking after the revenue streams rather than ignoring them would have been a good start.

[fomoco]

There is an old saying " Every Business is for sale , just get the price right"

So anything is posible, having worked at couple of companys, that Merchant Bankers owned, they dont really spend money on improvements, dress it up like at xmas turkey, then sell it.

[D.R.T.]

Originally Posted by Tourer

Certainly not sustainable the way they've been running it.

I am not sure what way you could have run it differently with expiring government contracts, lowering tv and attendance dove tailing into a new tv contract.

Many of the previous agreements weren't sustainable which doesnt leave you in a good position.

[peckstar]

Originally Posted by D.R.T.

I am not sure what way you could have run it differently with expiring government contracts, lowering tv and attendance dove tailing into a new tv contract.

Many of the previous agreements weren't sustainable which doesnt leave you in a good position.

So you keep saying this, but what you are suggesting is that ARCHER did a really crap job at die dilligence.

They were aware of the contracts ending, TV has been similar, as has attendance.

Their job was to organise sponsors and TV, they have had nearly two years to do this and have done an average job

[Bell_End]

But pecky, it is all the TC's fault you see.

[GTRMagic]

Originally Posted by peckstar

So you keep saying this, but what you are suggesting is that ARCHER did a really crap job at die dilligence.

They were aware of the contracts ending, TV has been similar, as has attendance.

Their job was to organise sponsors and TV, they have had nearly two years to do this and have done an average job

Not sure 'average' is a negative enough description of the achievements.

The sponsorship issue for the series is not good, that there are teams who cannot rely on their REC income this season and likely next is not good, that the buy price of a REC has arguably lowered because of this lack of income is not good.

The teev deal has potential to be a winner, but unless someone has been out there securing sponsors for the broadcast, this is not good.

All these things ultimately occurred under the watch of the teams, and the new majority owner, and this isnt good.

The story in the Fin Review a few months ago where Mr Leckie allegedly told the Archer Capital people they should have spoken to #7 as host broadcaster prior to investing may signal how wide and detailed a due diligence process may have been for the acquisition.

Is the rumoured 'TC to the Rescue' solution the best game in town as a replacement? Are there any alternatives? Can Archer put the excrement back in the equine and crank up the output?

[GTRMagic]

Originally Posted by Bell_End

But pecky, it is all the TC's fault you see.

Some people do seem to think that. But if you buy a second hand car from someone, and only look at the outside, and dont see if it runs, if it has petrol in the tank, if it has an engine aboard... and you still buy it.. is it the fault of the person selling the car that you didnt notice all of these things, or your own?

[Average Punter]

Seems to me that Archer thought they were buying a "business" and are trying to run it like a business.

When actually V8s are about entertainment, and as such needs an "entrepreneur" who knows how to sell entertainment.

[NinnyMan]

V8Supercars is a business. An entertainment business.

Just like most pro sports, it's run like a businesses. The teams,
the suppliers, the promoters, the media all come together to make
V8 Supercars one large business. At the end of the day it's still all
about making money. The actual "racing" is just the means in-which
to make that money.

[db120176]

For most capital companies, selling at a loss may be preferable than having their cash tied up in a non-performing asset. The opportunity cost of having those funds tied up in a flaccid company rather than in an appreciating asset or a company that can be turned around quickly may make a sale more likely

[rik]

Originally Posted by GTRMagic

The sponsorship issue for the series is not good, that there are teams who cannot rely on their REC income this season and likely next is not good, that the buy price of a REC has arguably lowered because of this lack of income is not good.

Series and Event sponsorship loss/reduction has been significant in Archer's time, not just TV. Big series sponsors in XXXX and BigPond have gone and not replaced. These alone would have been many millions per year. Also looking at the 2013 calendar they're now without sponsors for major events such as the Sandown 500 and Sydney 500, aswell as for some of the lesser events.

REC values have to be much lower now, but who's selling?