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CVC Capital Partners has sold another $500 million stake in Formula One to US-based Waddell & Reed Investment Management Company, according to a brief statement published on CVC’s website late Friday.
The sale comes a couple of weeks after Formula One decided to hold off on launching the institutional bookbuilding for its Singapore IPO due to the poor market environment. The deal had been expected to raise between $2.5 billion and $3 billion, and bankers had been doing investor education for the deal for two weeks by the time it was put on hold.
This latest sale of a stake by Formula One’s controlling shareholder also follows on the heels of three other private placements of shares earlier this year that had reduced CVC’s stake to about 42% from 63.4%. As reported earlier by FinanceAsia, CVC had sold $1.6 billion of stock to three investors, including Waddell & Reed, at a price that valued Formula One at an enterprise value of about $9.1 billion ($7.2 billion of equity and $1.9 billion of debt).
This latest investment by Waddell & Reed was done at the same price and increased the investment company’s stake in Formula One to 20.9%. It had previously invested $1.1 billion for a 14% stake.
The other two investors that bought shares through the pre-IPO placements were Blackrock and Norges Bank Investment Management, which invested $196 million and $300 million respectively. The latter is controlled by the Norwegian central bank and manages the sovereign wealth fund that is in charge of investing Norway’s oil revenues.
The latest sale will reduce CVC’s stake in Formula One to just above 35% and eases the pressure on the private equity firm to do an IPO right now in order to be able to provide a return on the investment for its own investors. After all, it has just raised a total of $2.1 billion from the pre-IPO placements. Indeed, a source said yesterday that while the IPO was previously on hold, it is now definitely off and all work has been halted. The shareholders may return at a later date if the markets improve, but that won’t be until later in the year at the earliest and the IPO will probably also be smaller, the source said.
“CVC will probably still take Formula One on the journey towards a publically listed company, but they have bought themselves a lot of flexibility through the pre-IPO placements,” the source added.
Essentially the placements have de-risked the whole transaction, which in light of the on-going volatility in global markets does seem like a smart move.
While Formula One and the bankers involved in the IPO hadn’t given any indication of when they might kick off the bookbuilding, the company did have a deadline of sorts since the financial accounts included in the listing prospectus were about to go stale in early July. If it hadn’t launched the deal by then, it would have had to update the prospectus with new audited numbers before it could return to the market — a process that typically takes at least a couple of months.
Meanwhile, it is now clear that Waddell & Reed were raising money specifically to fund this latest $500 million investment in Formula One when it reduced its stakes in Hong Kong-listed Macau casino operators Sands China and Wynn Macau through two concurrent block trades last Thursday. It also explains why it chose to do those deals on a day when Asian markets were under pressure ahead of the Greek election and after Moody’s cut its credit rating on Spain by three notches to Baa3.
Waddell & Reed raised a combined $253 million from the sale of a 0.5% stake in Sands China and a 1.1% stake in Wynn Macau. Both deals were priced at the bottom of the indicated range for a 5% discount.
UBS was the sole bookrunner for both blocks. The Swiss bank is also believed to have been instrumental in arranging the pre-IPO placements in Formula One, including the latest sale to Waddell & Reed last week.
UBS was joint global coordinator and joint bookrunner for the Formula One IPO together with Goldman Sachs and Morgan Stanley. CIMB, DBS and Banco Santander were joint bookrunners.
The fact that the IPO is cancelled for now deals another blow to the Singapore Exchange, which had viewed Formula One’s decision to list there as an important milestone in its struggle to keep up with Hong Kong in terms of attracting high-profile international listing candidates. It comes after it emerged late last week that the owners of Manchester United have given up on a Singapore listing for the premier league football club and are now pursuing an IPO in the US.
According to a source, the desire by the US-based Glazer family to have differentiated voting shares to allow them to keep control of the club after listing is one of the key reasons why they are now looking at going public in the US instead. The Glazers own 100% of the club following a leveraged buy-out in 2005.
The Singapore Exchange (SGX) had agreed to allow different share classes, but the source said because the structure was untested in Singapore there were a lot of discussions back and forth on exactly how to implement it and the deal structure was getting very convoluted. By comparison, US investors are very familiar with different share classes, including non-voting shares, so it will be a non-issue there.
The source confirmed that US investment bank Jefferies has been hired by the Glazers to help them pursue a US IPO. Jefferies will take a lead role, while Credit Suisse and J.P. Morgan, which until now have been working on the Singapore listing, are also still on the deal. Morgan Stanley, which was mandated as a bookrunner for the Singapore IPO, is no longer part of the line-up.
ManU was initially planning to come to market in September last year, but volatile global markets caused them to postpone the deal. At that time, there was talk about a deal size of about $1 billion, based on expectations that the current owners would sell 25% to 30% of the company.
