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EM.TV in grand prix deal
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March 22, 2000: 10:31 a.m. ET
German media firm pays $1.65B for stake in Formula 1 auto racing; plans float
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LONDON (CNNfn) - German media firm EM.TV & Merchandising sealed a $1.65 billion deal Wednesday to secure a 50 percent stake in the company that controls international grand prix motor racing. It also plans to acquire a further 25 percent ahead of a stock market listing next year.
The deal ends a three-year attempt to cash in on the booming interest in Formula One racing by Bernie Ecclestone, the British promoter who manages the 16-race season and effectively controls lucrative television and merchandising rights.
The acquisition also marks in a stellar leap for EM.TV, whose roots lie in producing kids cartoons and which came to prominence last month with the purchase of the children's TV shows "The Muppets" and "Sesame Street".
EM.TV is paying $715 million in cash and 10 million of its own shares for a 50 percent stake in Slec, the holding company controlled by Ecclestone which manages Formula One media rights.
EM.TV is acquiring the 12.5 percent stake in Slec held by Morgan Grenfell Private Equity, a unit of Deutsche Bank (FDBK), and a 37.5 percent stake held by Hellman & Friedman, a California-based investment group. Both companies stand to make a near-100 percent profit on their investment. Hellmann bought its stake just four weeks ago.
 The German company said it was also negotiating to acquire a further 25 percent in Slec from Ecclestone's family trust, and plans to float the motor racing unit as a standalone company in the first quarter of 2001.
The German firm plans to expand the digital TV coverage of grand prix racing and building up merchandising revenue from the sport, an area that analysts say is relatively under-exploited.
Ecclestone has transformed the economics of the sport since acquiring marketing rights from Fisa, the Swiss-based world governing body for motor sport, more than 20 years ago.
A deal with a checkered past
Slec clocked up sales of $450 million last year and has invested heavily in subscription and digital TV coverage of Formula One, which is sold to 200 channels in 120 countries and regularly attracts some of the largest TV audiences in sport.
However, Ecclestone's control of the sport has attracted the attention of European regulators who continue to investigate his contracts with media companies and race circuits. The probe has led to often bitter spats with the Brussels-based competition chiefs, though Ecclestone now claims that contracts have been altered to meet their concerns.
 The uncertainty created by the probe led to the shelving of float plans for Slec last year and also clouded a $1.3 billion bond issue by a subsidiary of the company last May which had to be halved from its planned issue size.
The grand prix racing season started last week in Australia with a race won by Michael Schumacher, the German former world champion.
EM.TV shares were 7 percent higher on Frankfurt's Neuer Markt, and the company said the deal would boost earnings by 50 percent over the next few years. 
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