F1 shareholders given $1bn payout

Just days after the media and fan backlash at the prospect of losing Monza from the F1 World Championship calendar due to disparities in the proposed financial deal, the sport’s owners have completed a refinancing deal that will result in a major payout for shareholders.

The Telegraph newspaper has reported that F1’s bank borrowings grew by $2bn (£1.3bn) in 2014, half of which was paid to investors – primarily private equity firm CVC, which received some $350m.

The latest payout follows a strong financial showing for the sport over the past 12 months, with revenue rising by 3.2% to a record level of $1.8bn, and pre-tax profits of $394.1 – up by more than a third year-on-year.

The latest figures suggest that the new races in Russia and Austria were major factors in F1’s financial growth, contributing an estimated $62m in annual race hosting fees – some $16m more than the amount paid by India or South Korea, the races that were replaced.

F1’s financial future

Reports emerged in June that a consortium of investors were planning a bid for the majority share of Formula One Group, as CVC may look to sell its 35% stake in the sport after nine years of ownership.

The jump in profits announced today is expected to make the sport a more appealing prospect to potential suitors, with financial experts estimating any deal to be worth upwards of $8bn – which would yield a profit of $6bn for CVC.

With deals for new races in Mexico and Azerbaijan already in place, F1 rakes in around $1.2bn in total revenue from race organisers, with a further $161m from TV contracts, as well as travel and freight services to the teams

Furthermore, F1 generates in excess of $110.9m from the Paddock Club, its corporate hospitality outfit, which grew by 4.9% over the past 12 months.

What does this mean for teams and fans?

The good news is that teams are set to profit from the growing value of the sport, with prize money estimated to be worth in the region of 63% of the sport’s earnings before interest, tax, depreciation and amortisation.

In fact, prize money has risen by 8.2% over the past year to $863.1m.

However, as highlighted by the controversy over a deal to extend Monza’s place on the F1 calendar – a position that it has held since the inception of the sport in 1950, with the exception of a single race in 1980.

There is also growing unrest from fans over the perception of F1’s greed, and news of growing profits, payouts for stakeholders and talk of considerable profits support the view that the sport has now become a business first and foremost.

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