By Christian Sylt, with Caroline Reid
You’ve got to hand it to Bernie Ecclestone. He’s almost 81. A ripe old age. And yet he’s never been more powerful.
Every year he conquers new lands for Formula 1. His wealth is secure, having sold $2.5bn of stakes in the sport. He has a new woman in his life, the 33 year old Fabiana Flosi.
And he’s still the most talked about man in sport.
The latest gossip is that he bribed a German banker called Gerhard Gribkowsky $44m in 2006 to undervalue Formula One when it was sold. Ecclestone admits he paid the man the money. But was it a bribe? Of course not, Bernie tells me – more of that later.
The second rumour is that Ecclestone is about to buy back a controlling stake in F1. Currently private equity firm CVC is the rights holder. Ecclestone is merely the ringmaster. Why doesn’t he buy out CVC, they ask?
Well here’s your first LondonlovesBusiness.com exclusive: he tells us he isn’t, and will never, buy that stake back. Again, more of that anon.
For the interview I show up at the Princes Gate HQ. Honestly: I can’t wait. Interviews with Ecclestone are always a blast. He is famously blunt, with a Tourettes-like ability to blurt stuff out like this: “Women should be all dressed in white like all the other domestic appliances.”
And on democracy: “It hasn’t done a lot of good for many countries – including this one.”
No one gives better lines. Or bigger scoops.
He is on close personal terms with Putin and the Russian cabinet
And he’s always so utterly down to earth.
Rich folk tend to put on a show for journalists. An army of waiters swarmed around hotelier Sir Rocco Forte when I interviewed him in the Savoy Grill. Saudi Prince Alwaleed, worth $20bn and who actually owns the Savoy Grill, had armed bodyguards aplenty standing by when I met him last at his hotel in Paris.
Ecclestone is an exception to this peacockery.
He used to host journalists at his favourite West End pub, the Swag & Tails. His table faced the door allowing him to survey the comings and goings of the smartly-suited crowd as he tucked into the surprisingly good food on offer.
However, this all came to an end two years ago when the pub closed its doors due to complaints from neighbours about noisy drinkers.
Ecclestone has the cash to iron out life’s little difficulties. So he bought it for £1.7m to keep it open. Alas, this was a rare example of a battle he didn’t win. He couldn’t overturn the council’s order and the pub was compelled to shut. In typical style he had the last laugh though and hung a neon sign in the window heralding the imminent arrival of a fish and chip shop on the premises. “Churlish” and “childish” was how neighbours saw it.
Maybe. As his rivals in F1 have learned, you don’t put one over on Ecclestone and get away with it.
Now he’s got a new haunt – the café of the Armani store on Knightsbridge’s Brompton Road. Another modest gaff. And he doesn’t even have a chauffeur to take him there. Instead we leap into his Toyota people carrier and he speeds off.
Ecclestone has a nippy driving style but when we arrive after a five minute drive the real fun begins. It seems that either all the locals know Ecclestone or he knows them. He stops to talk with a seemingly random electrician waiting by his van. “He works for us,” Ecclestone tells me.
The interview starts with his views on the turbulence in European economies. “The world is mad,” says Ecclestone softly and seriously. “The problem is there is a social system run throughout Europe so it is impossible to be competitive. We have got currencies, the Euro and Sterling, that are grossly overvalued so it is difficult to export. F1 deals in dollars but we are in London because I live here. People go to live in Monaco so they don’t pay tax but I would rather be happy and live in England and pay my taxes here.”
This isn’t a random rant on economic affairs. Idle comments are rare with Ecclestone. There is always some kind of motive behind almost everything he says. His view on currency valuations is driven by the recent bailout of Greece. It is somewhat of a sore point since one of the most high-profile supporters of the bailout is Germany – a country whose government is not prepared to pay more towards its F1 race hosting fee estimated at $12.7m.
“When I was in Germany I said to the race promoter that he should see if the Greeks will give you some of your money back,” says Ecclestone. There is more than just a hint of humour. Not that you’d know it from his deadpan face.
Unlike most opinionated tycoons, his views matter. Nobody on earth has a greater roster of powerful friends. Take politics. David Cameron recently admitted he had no contact with Putin or the Russian government? And Bernie? Why, he is on close personal terms with Putin and the Russian cabinet. They shook hands on an Russian F1 race only last year. At the races there is always a throng of prime ministers and heads of state desperate to talk to him, usually about securing rights to one of the 20 races.
Beside them jostle chief executives of Fortune 500 firms want to talk to him about becoming one of F1’s official partners. Last year F1 added watch company Hublot and investment bank UBS to its roster of eight official partners which, together with four licensing deals, bring in a total of $90.5m. It is more than any of the 12 teams make in sponsorship except for Ferrari and McLaren. “We can put the sponsor’s brand on the front pages,” says Ecclestone.
In July, a lawsuit about the sale of the sport to private equity giant CVC was filed against Ecclestone by German media firm Constantin Medien. It came just days after Ecclestone was formally accused of paying a $44m bribe to allegedly get F1 undervalued when it was sold to CVC. The two events are closely connected.
The backstory is complicated, but worth unpicking.
“The price I got the banks for their shares was double the value they were in their books at.”
In 2000 and 2001 Constantin, then known as EM.TV, bought a 75 per cent stake in F1 but came close to collapse during the recession over the following years. It was saved by another German media company, Kirch, which bought 58.3 per cent of EM.TV’s stake in F1 using a $1.6bn loan from state-owned bank BayernLB, JP Morgan and Lehman Brothers.
Kirch itself went bankrupt in 2002 and the three banks took over its F1 shares which their loan was secured on.
EM.TV then agreed to sell to the banks the 16.7 per cent stake it had been left with. The stake had a balance sheet value of €204m but, according to EM.TV company documents it was sold for just €8.5m on condition that when the banks sold the combined 75 per cent the media firm would receive “a partial interest in eventual surplus proceeds exceeding the loan amount.” Writing down its F1 stake by €195.8m led to EM.TV making a €310m net loss in 2002 – all in the hope that a further buyer would pay a huge amount for the rights later on. The gamble did not pay off.
Although CVC was the highest bidder, its price left the banks with $1.2bn: a full $400m less than they had loaned Kirch. So no payment was owing to EM.TV.
The banks were out of pocket, but they weren’t too bitter. The amount the banks got was still more than they expected since they had gradually reduced their internal valuation (kn
own as book value) of their F1 stake due to uncertainty over the sport’s future. In 2004, Werner Schmidt, who was BayernLB’s chairman at the time, said that the value of the stake was “far lower” than €650m and Ecclestone adds: “The price I got the banks for their shares was double the value they were in their books at.”
BayernLB announced a valuation yield of €328m in its 2006 results and stated that the sale of the F1 shares “decisively contributed to the positive result.” In short, the bank was paid more than the book value for the shares. EM.TV was not so fortunate.
The banks had got back less than they had loaned Kirch which meant EM.TV’s gamble had gone sour. And in January of this year the deal hit the headlines.
Gerhard Gribkowsky, the BayernLB risk manager who advised the bank on the sale, was arrested on suspicion of receiving a $44m bribe for undervaluing the stake. In July prosecutors formally accused Ecclestone of paying the bribe.
In response Ecclestone admitted making the payment but said he did so because Gribkowsky had threatened that he would otherwise report unfounded allegations about his relationship with his family trust to the Inland Revenue.
The prosecutors’ claims led to EM.TV/Constantin filing the lawsuit against Ecclestone as well as his family trust, his lawyer Stephen Mullens and Gribkowsky. Constantin claims they are to blame for selling F1 too cheaply and so it is due over $100m.
Constantin’s agreement to receive proceeds from the sale was with the banks but they are not named on the lawsuit and Ecclestone tells LondonlovesBusiness.com it is nothing to do with him. “I didn’t know at the time that in the deal if the shares were sold for more than they paid for them, EM.TV would get a percentage. What percentage I have no idea. I have never heard of the contract, never seen the contract and know nothing about the contract.”
He adds: “They said I paid Gribkowsky money to sell the shares cheap and if they had been sold at the right price they would have got a percentage. It’s bollocks. The shares were not undervalued and who knows what they were worth? That’s the whole point.”
According to Formula Money’s projections, by 2016 F1’s annual revenue will hit $3.3bn – more than double that of 2010.
With such growth there are always rumours of buyers.
He is a man who, for a long time, has had more money than he could spend, power on an international scale, and it’s all thanks to his job
Ecclestone insists that CVC has no plans on selling F1 but adds: “I have no doubt in my mind that if somebody came along with a respectable sensible offer they would probably say let’s have a chat. I think one or two people have come along with an offer they probably thought was sensible but CVC didn’t.”
Earlier in the year Rupert Murdoch’s News Corporation media empire was believed to be considering making a bid for F1 and there were fears Ecclestone would be ousted if it took over the sport. However, the phone hacking scandal put paid to its ambitions in F1 and Ecclestone says “News Corp has not made a return visit”.
And what about him?
The threats to Ecclestone’s position have led some F1 commentators to suggest that the billionaire may buy back a majority stake in the sport. It would be the easy option and this is one reason why Ecclestone won’t be taking it.
“It isn’t likely that I would buy F1 back and I can’t imagine taking back majority control,” he says adding “CVC would want what it is worth and I wouldn’t want to pay what it is worth. Not that it is not worth it but it would be a lot of money. It’s a big thing to hang around your neck at my age.” Instead, Ecclestone believes that another private equity firm will snap up F1.
Ecclestone says he will stay as CEO “as long as I can deliver,” and although this may seem hard to understand given his age and wealth, at heart it’s very simple. He is a man who, for a long time, has had more money than he could spend, power on an international scale and it’s all thanks to his job. “Something different happens every day. There’s always new things going on. New problems to solve,” he says. Giving that up would be an admission that the race is all but over and for a man who thrives on the thrill of the chase that isn’t likely to happen.
His dedication to work has even led to the breakup of his marriage. After 24 years Slavica divorced him in 2009. Shortly after he hooked up with Fabiana Flosi, a level headed lawyer and sports marketing executive from Brazil. She might be in her early thirties but after two years of dating the pair are closer and happier than ever.
Following Ecclestone would be tough and although no one is being groomed to succeed him, he has prepared for it. “The network is there. It’s all done. The contracts are long term in place,” he says. However, the decades of trust and experience that Ecclestone has built up are impossible to pass on. “It’s not going to be easy for somebody to follow me and do that and it’s not the sort of thing you can teach anybody,” he says.
It explains why no one is being groomed for the job and why there will only ever be one Bernie Ecclestone.
Christian Sylt is a full-time writer on the finances of Formula 1. He co-edits with Caroline Reid the annual commercial guide to the sport,Formula Money, which details what every sponsor spends, driver salaries and team incomes.