Back from the holidays

April 27, 2012

“Did you have a nice school holiday?” said Penelope (Roedean), with just the right hint of irony, as The Mole strode into the office on Monday morning. He looked tanned. He had been down on the Cote d’Azur for a fortnight with his ghastly grandchildren, who had thus far completely failed to develop into young gentlemen, despite very large sums of money being spent on their education.

“Not really,” he said. “Mrs Mole was so worn out that she has gone off to see her sister for a holiday to get over the holiday.”

Mrs Mole’s sister had married a Scotsman and had banished herself to Mallaig, a small fishing town where her husband Duncan does “something with kippers”.

“I guess it was rather better than going to the Bahrain Grand Prix,” he added.

“Given a choice between Bahrain and the Cote d’Azur,” said Penelope (Cheltenham Ladies College), “I think I would probably go for the latter. You meet fewer Hezbollah in the bars on the Cote d’Azur.”

Her grey eyes sparkled with laughter and for a moment the icy Athena seemed about to melt.

“True,” said The Mole. “These fellows do not seem much given to bougainvillea-scented terraces and gentle cocktail parties.”

“Hmmm,” said Penelope (Roedean), with a look that suggested butter WOULD melt in her mouth. “I am not so sure. They are definitely into Fuzzy Navels. Old Fashioneds, occasional Kamikazes and lots of Molotovs.”

“And no Americanos,” she added, with the kind of chuckle that causes cavalrymen to fall off their horses.

“There was nothing much we could do about Bahrain,” Penelope (Wycombe Abbey) said, changing the subject. The Mole turned to her, smiled and, for a brief second, thought with sadness of the inevitable day when she would find a man who was not frightened by her and would be whisked off to a church and, rapidly thereafter, a maternity ward.

“We did consider trying to get the all the F1 freight Jumbos from China to Bahrain to ‘go technical’ in Shanghai…” she added, “but you know it is not easy being MI6 and operating in China these days.”

“Never has been,” said The Mole. “But good thinking. Calling off the Grand Prix because the freight failed to arrive. Force majeure. A good excuse. Still, one got the impression that Bernie Ecclestone and Jean Todt were really rather keen for the race to go ahead. I have no idea why. Formula 1 got a hammering in the newspapers. Even the French ones. It was not hard to predict.”

“Perhaps they are trying to bring down the value of F1?” said Penelope (Benenden), peering across her desk through her glasses. “Perhaps they don’t want this wildly optimistic flotation that is being planned by the CVC suits. They seem awfully gung-ho. They are aiming for July.”

“I cannot imagine that it will happen,” said The Mole. “It is by no means certain that they will find the investors they need. I guess that is why they have a real bus-load of book runners.”

“If you hire enough people to look for the big gamblers then I suppose you might find enough of them,” said Penelope (Wycombe Abbey), “but I cannot see anyone buying into the idea if there is no Concorde Agreement in place. They are trying to give the impression that they are addressing the succession issue with these leaks about the Nestlé fellow, but the fact remains that it would still be Bernie Ecclestone in charge, wouldn’t it?”

“And you know how long negotiations for the Concorde Agreement take,” said Penelope (Benenden). “All these teams have lawyers and they all raise questions. It will take months and months, and that is if there are no disputes. I cannot see the whole thing being done by July. I don’t see Mercedes-Benz being in any hurry to help CVC out.”

“There is also the FIA,” said The Mole. “They have to sign the Concorde Agreement as well, and nothing moves very quickly in the Place de la Concorde. The FIA also has a right to veto any change of ownership in the Formula One group and that could hold things up, if someone wanted it to. I don’t suppose that the flotation would change the ownership, but the FIA might not wish to make any rapid decisions on that question. The federation does not get much from the Concorde Agreement these days. Perhaps that might be an opportunity to squeeze a few more pennies from the financiers. If they are in such a hurry maybe they would pay up.”

“But why are they in such a hurry?” said Penelope (Roedean). “Do they need the cash? Are they worried that the value will go down? I don’t get it.”

“Maybe they think if they make the flotation fast and exciting people will be drawn into it and invest with less caution,” said The Mole.

They paused for a moment.

“Let’s have a sit down and think this one through,” said The Mole. “Over some coffee and biscuits. Chocolate biscuits.”

Miss Pringle-Featherby (of the Berkshire Pringle-Featherbys) reached down to the bottom drawer of her desk and pulled out a packet of McVitie’s Chocolate Digestives.

“Remind me to recommend her for an MBE,” said The Mole. “For services to the intelligence community.”

A few minutes later they were gathered in The Mole’s office, with mugs of steaming Nescafe and lots of biscuit crumbs.

“Right,” he said. “Let’s go through this.”

Penelope (Benenden) drew a strand of dark hair away from her glasses and began talking. She was the one who knew all the answers when it came to background.

“The different funds of CVC Capital Partners own 63.3 percent of the shares,” she said, with a flash of her dark eyes. “There is some speculation that they will use the loan being raised at the moment to buy the 15.3 percent of the company that is owned by Lehmann Brothers. These shares must be sold soon because Lehmann Brothers is being liquidated. Thus, in theory, CVC might own 78.6 percent by July. Thus selling 20 percent would leave them with 58.6 percent and still firmly in control. The rest of the shares are pretty spread out. Bambino Holdings own 8.5 percent and Bernie Ecclestone 5.3 percent, while his staff have 3.6 percent. The rest are irrelevant.”

“So CVC can sell their shares in they want to?” said The Mole. “They own the company.

“As far as we know,” said Penelope (Benenden). “Short of breaking in and reading contracts, it is hard to know more than that.”

“OK,” said The Mole. “Let us assume they can sell and cannot be stopped from doing that. What might stop the flotation?”

“Mercedes-Benz,” said four Penelopes at the same time.

The Mole noted the unanimity.

“I am not an expert on all this,” said Penelope (Benenden), “Not legally, anyway. But I am sure that if a party to a previous deal is excluded from a future contract, there would be questions of constraint of trade, or something like that. There are stories floating about that Ferrari, Red Bull and even McLaren may have been granted seats on the board and you can bet that Mercedes wants similar status. The Formula One group can argue against that, but that could take months and months and that would torpedo any flotation. The other teams may not be big enough to stand up to the Formula One group, but Mercedes certainly is. Whatever the case, even if there was no value in a lawsuit, there could be one and if that happens then nothing is not going to get sorted out by July.”

The Mole nodded.

“You also have to consider the fact that Mercedes supplies engines to three of the 12 teams,” he said. “Thus an aggressive approach towards Mercedes is unlikely to make them back down. They can do more damage to F1 than F1 can do to them.”



  1. Surely PWC, the LBL administrators, can sell the 15.3% (presumably of Delta Topco) to the highest bidder, indeed it is their duty to do so. Now if I was a German car company who felt disgruntled, I think I may well have a word in someone’s ear at PWC not to sell before receiving my own offer, which will be attractive to the creditors. However I will want to have a full examination of the underlying business of that 15%, something a lillte less likely to happen than the Mafia publishing full audited accounts.
    So I can either buy, or hold things up for as long as I want, I can also affect the price that is paid for the 15%. Which incidentally might set an indicated price per share (or %) which will be recalled by the market, if the flotation ever happens.

    Then again we have to ask what are we actually buying? A share of a company (we don’t know which one, it may be Topco or Prefco) Are those shares held by PWC of any relevance? Or have they become worthless since the addition of Prefco and the transfer of rights to that company? Bernie’s history is littered with people who thought they had bought something, only to find later that they had been out-thought and generally outclassed and that the goal posts had been moved in the night. The man is a genius at business, lucky for us he did not turn to crime as even Bond would have difficulty with, “The man who bought the world”. Only Nicola Foulston could save us.

  2. As a more than four decade fan of F1 motor racing stranded in the wastelands of America, I look forward to and delight in reading these episodes. Spicy, thought provoking stuff, and very humorous. Perhaps I read too many Ian Fleming novels as a young boy. Well done.

  3. Excellent articles as always.

    Crumbs indeed; McVities and Blackstone and their Lehman origins.

  4. Perhaps they are thinking; buy the Lehman shares (to take them to 78.6%), offer 5-7% to Mercedes in lieu of a seat on the board and still offer a 20% IPO in July.
    Perhaps going to Bahrain, with all the attendant issues that brought for F1, was deliberate to try to get a down valuation on the Lehman shares to pick them up cheaper! So: 78.6 – 7 – 20 = 51.6% which still leaves a controlling interest? Just a thought.

  5. Nescafé? Really? Isn’t that a little infra dig for the Mole?

  6. Sounds like a good ruse to keep others from picking up the Lehman bits… Why this would be a good job for old Briggsy— oops, he’s dead already, isn’t he…???

  7. Love your train of thought rpaco….

  8. McVitie’s have never been the same since they reduced the fat content. I must confess to buying Sainsbury’s own-brand these days, much nicer. Presumably The Mole could try Waitrose’s own, if they do them.

  9. fantastic story and im a fan racing will never be the same again without the mole…..

  10. FIA owns F1, CVC funds control rights. Rights can be rescinded. Investors buy assets.

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