Target: Formula One
Price: $200 million
Sponsor: Teacher Retirement System of Texas
The Teacher Retirement System of Texas will buy a 3 percent stake in the motor racing business from the Lehman Brothers’ estate in a deal worth about $200 million, the person said.
It follows a string of powerful investors that have bought into Formula 1, which organises motor races across Europe, the Middle East, Asia and the Americas, as owner CVC Capital, one of Europe’s largest buyout firms, gradually reduces its stake.
BlackRock, Waddell & Reed and Norges Bank Investment management invested in the company when public markets shunned a planned initial public offering of the Formula 1 business.Together with Texas Teachers, the investment groups will own some 30 percent of the business.
Texas Teachers’ deal for a portion of the Lehman Brothers stake values the equity in Formula 1 at about $7 billion, the person said. The private equity group refinanced Formula 1 earlier this year, raising $1 billion for future dividends to investors and acquisitions.
CVC assembled a majority stake in Formula 1 by 2006, buying out a number of minority investors for undisclosed amounts.
It still owns 35.5 percent of the company run by Bernie Ecclestone, who has been under investigation by German prosecutors in a bribery scandal, though no charges have been filed against him.
Ecclestone denies wrongdoing and has said he was the victim of coercion by a banker.
The sale of the 3 percent stake will be the first reduction in the Lehman Brothers’ holding in Formula 1 since the bank collapsed four years ago.
The Lehman estate still owns 12 percent in the business, which at the current price is worth some $800 million.
The Texas Teachers’ pension fund serves more than 1.3 million employed and retired teachers and had net assets of $101 billion at end-September 2011. The pension fund is one of the world’s largest private equity investors and has invested billions of dollars with firms including Apollo Global Management and Kohlberg Kravis Roberts & Co.
CVC declined to comment. The Teacher Retirement System of Texas and Lehman were unavailable to comment.
(Simon Meads is a private equity correspondent for Reuters news service.)