Liberty to Increase Formula 1 Deal Cash Payout

A day after securing the final regulatory approval for its $4.4 billion purchase of Formula 1, Liberty Media said it will issue $400 million in senior notes in a private offering to increase the cash portion of the deal.

Liberty received approval from the Fédération Internationale de l'Automobile (“FIA”), the governing body of Formula 1 racing, on Jan. 18, the last regulatory hurdle for the deal.  Liberty, which first announced the purchase in September, has said it plans to close the deal by the end of the month.

The cash convertible senior notes will be used to increase the cash portion of the deal to the selling shareholders by $400 million and retain in treasury the 19 million shares that would otherwise have been issuable to the selling shareholders based on the per share purchase price of $21.26. These Liberty Media shares will be reserved by Liberty for issuance to the F1 teams at a per share purchase price of $21.26.

“We think it’s important to offer the teams the chance to invest in F1 and further align our interests,” Liberty Media CEO Greg Maffei said in a statement. “We look forward to working with the teams to increase the appeal of this iconic sport and enhance the F1 business.”

Liberty has said one of its goals is to strengthen the teams that make up Formula 1, which have let Liberty know of their interest.

 “Several of the teams have expressed interest in investing and we have already begun productive discussions to make the sport more competitive and even more exciting,” Formula 1 chairman Chase Carey said in a statement.

The aggregate number of Liberty Media shares to be issued at the F1 closing will not change as a result of this transaction. Only the allocation of the 138 million shares will change as follows: approximately 57 million to the Selling Shareholders, 62 million to the third party investors and 19 million into treasury.

To the extent such shares are not issued to the F1 teams within six months following the closing of the acquisition, the shares will be retired. If the acquisition of F1 is not completed, Liberty will use the net proceeds from this offering for general corporate purposes, which may include capital expenditures, acquisitions, working capital, repayment of debt and repurchases of common stock. Pending the completion of the F1 acquisition or other such uses, Liberty intends to invest the net proceeds in cash equivalents or short-term investments.

The notes, as well as the associated cash proceeds, will be attributed to the Liberty Media Group. Pro forma for this financing and the closing of the F1 acquisition, total debt attributed to the Liberty Media Group will include the proposed cash convertible senior notes, $1 billion 1.375% convertible notes due 2023, $445 million Time Warner Inc. exchangeable debentures due 2046, $350 million drawn under a Live Nation margin loan, $36 million of other corporate level debt as of Sept. 30, 2016 and approximately $4.1 billion of existing F1 debt as of July 31, 2016.