Interpublic cancel BGP contract/Bernie buys contract until 2015 (merged x2)

[Stephen Green]

The following article has appeared on Reuters this morning:

01:41 20Apr2004 RTRS-UPDATE 1-Interpublic ends Grand Prix contract, sees charges

(Adds background, CEO statement)
LOS ANGELES, April 19 (Reuters) - The Interpublic Group of Companies <IPG.N>, the world's No. 2 advertising group, said on Monday it would take a $93 million second-quarter charge in order to be released early from its British Grand Prix contract.
Interpublic, home to agencies such as McCann-Erickson and Foote, Cone & Belding, has been cutting costs and shedding peripheral operations acquired during a buying spree over the last decade. In the fourth-quarter, the company took a $38 million charge for selling four British auto racing tracks.
In a statement issued after the close of trading on Monday, Interpublic said that in exchange for the early termination of its British Grand Prix contract, which had been set to run until 2015, it had agreed to pay $93 million to Formula One Administration Ltd.
The company said it still had lease and other obligations related to the Silverstone auto racing circuit, which hosts the British Grand Prix. It said those obligations would total near $62 million and would be paid through the end of 2007.
"This is another important step in our turnaround," said Interpublic Chairman and CEO David Bell. "From the point at which I was asked to lead this company, I have made it clear that it is inappropriate for us to be involved in owning or operating venue-based motor sports businesses. We are pleased to have moved closer to completing our exit from the motor sports business."
Interpublic shares closed up about 1 percent at $16.18 on Monday on the New York Stock Exchange. The stock is up about 4 percent since the start of the year.
The company is also the subject of a U.S. Securities and Exchange Commission probe into its restatement of earnings from 1997 to early 2002.
((Reporting by Kevin Krolicki, editing by Michael Miller; Reuters Messaging: kevin.krolicki@reuters.com@reuters.net; 1-213-955-6760))

[Super Tourer]

Very interesting - played straight into Bernie's hands in his 'relationship' with the British GP. Who else could afford to host the race - the BRDC certainly couldn't, this puts the race even more at the mercy of BE surely?

[Stephen Green]

Well reading the article it looks like the lease on Silverstone will be paid through to 2007 but it doesn't say when the BGP deal will end?

[Mackmot]

The BRDC may not but the members could, lets see how much they want it.

[Stephen Green]

Maybe JP will want it for Brands

Sorry, that was a joke and not a serious comment.

[PaulSands]

What odds that the British GP ends up at Paul Ricard
(I am only half joking about this)

[Nina]

I understand Bernie is buying the rights?

[CATMAN]

Ho Ho Ho what a surprise
I guess he will make it free entry and build fancy stands and facilities as a thank you gesture

[Nina]

There is already a thread about this??

He has already put money into improving the stone so I would imagine he will push for more improvements now he has the rights to the GP? He can hold the BRDC by the short and curlies.. a tactic hes been working on for years now - de-values the circuit, then buys the rights... just a matter of time before He will wanna buy the curcuit

I want a Hockenmheim style grandtstand from Luffield to Copse please Mr Ecclestone

[Adam43]

Originally posted by Nina
There is already a thread about this??

merged, if I may be so bold.

[PaulSands]

I would imagine the Motorsports Vision (Brands) and Clear Channel(Donington) have been in touch with Mr Ecclestone already..Donington maybe could dovetail any necessary upgrades (of which there would be Legion) into those planned for WSB? Interesting times ahead methinks.
As an aside where would Silverstone stand if it lost the British GP ? I know they claim not to make much money from the event but if they lost that I would imagine the circuit would be unsustainable

[Stephen Green]

Since when was Mr Ecclestone able to buy the rights to the British GP? Surely that is a conflict of interest? Where does it say he has bought the rights?

[Stephen Green]

Apologies, I have just seen the announcement on Reuters which is as follows:

By Alan Baldwin
LONDON, April 20 (Reuters) - Silverstone's owners issued a guarded welcome on Tuesday to Formula One supremo Bernie Ecclestone taking over as promoter of the British Grand Prix from 2005.
"In the expectation that Mr Ecclestone wishes to retain the British Grand Prix at Silverstone, we welcome the acquisition of the rights to the event by FOA (Formula One Administration)," said the British Racing Drivers' Club (BRDC).
"We look forward to hearing Mr Ecclestone's plans for the future success and stability of the British Grand Prix."
The U.S. advertising giant Interpublic announced on Monday they had reached an agreement to terminate their contract to promote the troubled event at Silverstone until 2015.
As part of the deal with Ecclestone's FOA, Interpublic agreed to pay them $93 million.
Ecclestone has been a regular critic of the BRDC and Silverstone over plans to refurbish the former World War Two airfield that hosted the first Formula One grand prix in 1950.
He likened it in February to "an old house that claims to need only a few repairs. Actually it needs major reconstruction. I don't see a future for it."
However he sounded more conciliatory this month in Bahrain, whose lavish facilities are a world apart from Silverstone's, when he said that he would hate Formula One to leave its traditional venues.
The BRDC will continue to lease the circuit to Interpublic until the end of 2007, with the U.S. Group committed to paying some $62 million over the remaining term.
"The BRDC believes it is of paramount importance to the sport and industry in the UK that we retain the British Grand Prix at Silverstone," the BRDC said.
"We are continuing discussions with our partners, including FOA, the Interpublic Group and the British government and remain committed to playing our part in retaining the grand prix."
Andrew Waller, managing director of Interpublic's Silverstone Motorsport subsidiary, said it was a good deal for all parties and could provide the breakthrough necessary to secure substantial funding for renovation.
"What happens next for Silverstone is potentially very positive," he said. "The rights are in very safe hands with Bernie."
((Reporting by Alan Baldwin, editing by Nick Mulvenney. Reuters Messaging; alan.baldwin.reuters.com@reuters.net; +44 207 542 7933))

[Super Tourer]

As I understand it, JP was quite happy that the GP rights were not included in the BHL sale, as he didn't want them and the financial headache that goes with them.

The whole mechanics of how the race is funded makes it a tricky financial proposition, even what must be one of the most successful and favoured races of the year, Melbourne, loses money.

Again, as I understand it, the race promoter, Octagon in Silverstone's case, pay FOM (Bernie E) to hold the race, a figure in the millions, their main income is gate money from the attendance. The TV rights income and even the circuit side advertising goes to FOM and Allsport respectively, ditto the main hospitality income.

From this income the promoter is supposed to fund the race, and meet a major element of the FIA criteria for improving the circuit.

In the mix at Silverstone is the BRDC who lease the circuit to Octagon, as essentially their sole main income, making the BRDC landlord of the GP, with no real financial interest.

The impass that Silverstone has been in, is that Interpublic couldn't/wouldn't fund anymore improvements at Silverstone and the BRDC wasn't in as posititon to do much either, with only around a £4M income - the rent from Octagon - as their core income.

It's make or break for Silverstone the BRDC is making all the right sounding noises about the future of the race, but in truth Bernie holds all the cards, he can either invest in Silverstone to bring it up to the standard of some of the other venues, or can it and release the slot to one of the many new venues vying for a spot on the calendar.

Of all people, Bernie E is probably the only one who can make improving Silverstone a viable alternative as it would be pushing wooden dollars around the table to a certain extent.

The issue is that no promoter can compete with government money that both builds circuits and subsidises the races, this arrangement is currently the favoured method of expanding the calendar and the immediate future it seems.

[PaulSands]

http://news.bbc.co.uk/sport1/hi/moto...ne/3642787.stm
The future of the British Grand Prix appears to be secure after Formula One supremo Bernie Ecclestone bought the rights to the race.

The BBC seems to be putting a more upbeat spin on it...more so than the specialist press who are talking in terms of "threats to the British GP"

[Stephen Green]

The problem is there is a 'cold war' between BE and the BRDC that has been raging for some years. Will the BRDC sell to Bernie? Will Bernie take the race to the Far East? Will the government match fund investment in Silverstone? Will JP spring a surprise and take the GP to BH with Bernies blessing?

All the imponderables.......

[mark_l]

Now Bernie has become the promoter of the GP, he takes the gate money.

As head of the FOM he already takes the TV money and a cut of Paddy Mcnally's money for advertising.

So what Bernie has done has bought the last slice of the cake that didn't have his name on it.

The BRDC are talking up the prospects for Silverstone but Bernie is not noted for sentimentality, and generally looks after B.C.E. first.

I think the days of the British GP are numbered. We all just have to find something else to look forward to in July 2005.

[Sodemo]

I would like to see better "external circuit" facilities like improved toilets and paths which aren't mud.

With regard to track changes, something should be done with Vale/Club, either;

- Make Vale/Club an actual overtaking opportunity.

or

- Alter Vale/Club, so they can overtake easier at Abbey.

And they should alter Luffield as its a pointless corner.

[Adam43]

Is Bernie putting his money where his mouth is? Will he make the British GP better?

OR

Will he get more than $93m from other places for the slot that it leaves free?

[Gt_R]

IMO, Bernie would make, even if it's not totally from his own pocket, a deal/plan to improve Silverstone significantly and use the BGP rights to great effect from Silverstone.

The future of BGP at silverstone seem to be secured with this news, and that the length of the rights justifies the huge investment requried to bring Silverstone up to standard as it faces the next decade.

Hopefully, slight fine-tuning of the Silverstone circuit would be made together with the facilities...it'd be awesome.

[Super Tourer]

As Adam says the situation is poised to move either way. On one hand BE might invest more into the race, on the basis that his organization now takes all the revenue, or it may hasten the demise.

I think 'bought' the rights is prob a technicality as surely it's a paper transaction between FOM and FOM.

One thing for sure, it's the final humilitation for Interpublic, to pay $93M NOT to hold an event on top of losing nearly (allegedly) £90M on the purchase price of BHL, clearly shows the value of sticking to the corporate knitting as it becomes yet another corporation to limp away licking it's financial wounds after an attempt at being in the F1 and general motor racing business.

[Super Tourer]

GrandPrix.com have a positive slant on it saying the future of the race is 'virtually guaranteed' and that Bernie will use the $93M paid by Interpublic to invest in upgrading Silverstone - let's hope so!

http://www.grandprix.com/ns/ns12762.html

[RWC]

wow you guys are all being very positive about this....
conidering bern has wanted to drop the brit gp for some time!

[Cynic]

I know there is already a thread about this in the F1 forum, but I figure this has ramifications for us as well. For those who haven't heard it, Interpublic released a statement yesterday in which they have effectively sold the rights for the GP back to Bernie from 2005 onwards. This has got to be the death knell for the event. The reason the BRDC sold the rights in the first place was because they reckoned they couldn't afford to run the race, and we know that Bernie and MAx both have an axe to grind with Sillystone for whatever reason. Given the losses that Octagon made I can't realistically see anyone else coming in for the rights, and I given the incoming tobacco advertising laws, and the low gates in recent years I can't see Ecclestone putting too much effort into keeping the race going, not with Russia, China and god knows who else waiting in the wings. Who wants to lay money on the race going as soon as he can mange it?

[Stephen Green]

I'm afraid I am not so optimistic as the rest of you. Can you explain why BE should invest in a circuit he neither owns or leases? It makes no financial sense for him to spend a penny on Silverstone as the beneficiary would ultimately be the BRDC and we all know he and they are far from 'mates'. I think he will take the BGP to an alternative venue, possibly Donington or at an outside bet Brands which would be the final slap in the face to the BRDC.

I hope I'm wrong but something tells me the days of BGP at Silverstone are numbered.