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Red Bull Formula One driver Sebastian Vettel of Germany drives out the pit during the Australian F1 Grand Prix at the Albert Park circuit in Melbourne March 18, 2012. (BRANDON MALONE/BRANDON MALONE/REUTERS)
Red Bull Formula One driver Sebastian Vettel of Germany drives out the pit during the Australian F1 Grand Prix at the Albert Park circuit in Melbourne March 18, 2012. (BRANDON MALONE/BRANDON MALONE/REUTERS)

Formula One warms up for Singapore IPO Add to ...

The owners of Formula One motor racing are considering a partial flotation of the business in Asia, an option also explored by English soccer champions Manchester United, to tap demand in the region for strong sporting brands.

A flotation of Formula One (F1), which draws more than half a billion TV viewers for its races, has long been mooted, but the issue is made more urgent by the expiry this year of a confidential commercial agreement between the rights holding company and the teams whose cars compete in the 20-race series.

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Private equity firm CVC Capital Partners, which acquired majority control of F1 in 2006, would continue to be a long-term holder of the business, and the initial public offering option being explored is for only part of the company, a source close to the matter said.

Britain’s Sky News has reported that CVC has asked Goldman Sachs to examine a placement of some F1 shares with a new investor as a precursor to a formal IPO process in the southeast Asian city state of Singapore.

The source declined to comment on the Sky report, which placed a potential valuation of over $10-billion on the business.

Goldman Sachs and CVC, which owns 63.4 per cent of F1, also declined to comment.

A minimum 15 per cent float in Singapore would make the deal worth $1.5-billion.

While Manchester United’s Singapore IPO was put on hold due to volatile markets, sources have told Reuters the club has not abandoned its plan to list in Singapore but that no decision has been made on the timing.

United has a global fan base estimated at 333 million, including many in Asia who follow the sport via live television.

F1, managed by Briton Bernie Ecclestone, 81, has also developed internationally in recent years.

Under the leadership of Mr. Ecclestone the circuit has expanded from its European roots to embrace fast-growing markets in Asia.

Singapore, which competes with Hong Kong for international listings, became the venue for the world’s first night-time Grand Prix in 2008.

Investor reaction to such a listing could be difficult to gauge as there was plenty of skepticism around Manchester United’s business and profitability when the club was preparing for a public float last year.

“The same thing will apply to F1. At the end of the day it depends on their profitability and whether they can generate returns for shareholders,” said Ng Kian Teck, lead analyst at SIAS Research in Singapore.

“But F1 has good branding and strong market share, and they are probably one of the few players that could do racing events to their kind of scale. That would probably put them on a better foothold compared to Man U.”

The F1 series had annual sales of €1.17-billion ($1.55-billion U.S.) and employs 200 people, according to the CVC website.

F1’s revenue for the current season, which began at the Australian Grand Prix on Sunday, will reach $2-billion for the first time, said industry monitor Formula Money.

In a recent report, Formula Money added that new races in the United States and Russia would help boost income from F1’s commercial rights by almost 50 per cent to $2.9-billion by 2015.

Under the agreement due to be renegotiated, the teams are believed to get half of F1’s underlying core profit in prize money.

Italy’s Ferrari, owned by Fiat, gets an additional payment in recognition of its status as the oldest and best known team.

The sport has been dominated in the last two years by Red Bull Racing, whose German driver Sebastian Vettel is seeking a third successive championship.

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