The last few weeks have been confusing for those who follow the business end of the sport of international motorcycle road racing. Last Friday’s announcement that the Toronto-based Canada Pension Plan Investment Board (CPPIB) had purchased a 39% stake in Dorna was the icing on a very complicated cake.
CPPIB, part of our public retirement income system here in Canada, reportedly paid around 400 million Euros ($518 million CDN) for their stake in the sport of world championship motorcycle racing. Six years ago, Dorna sold outright for slightly more than this amount.
As well, CPPIB spent $400 million on Formula One Group, the company that runs the F1 world championship Grand Prix tour. This arrangement was described as “more of a loan deal” for F1, the series working with several different (including some failed) financial groups in the past couple of decades. The F1 loan will expire in 2019.
Recently, the international road racing community was surprised by the actions of private equity firm Bridgepoint, the major investment group based in the UK that owns both Dorna (MotoGP) and Infront Sports & Media (World Superbike), although the two groups are (were?) part of different funds.
It now appears that the two formerly separate groups that conduct the two world championship road racing series are now combined under the Dorna banner as part of the many holdings of Bridgepoint.
Bridgepoint announced at the end of September that Dorna would take over all the business activities of Infront, meaning that MotoGP boss Carmelo Ezpeleta would now control the World Superbike tour too. This was considered bad news by Superbike supporters, since that series seemed to have a better relationship with the bike industry (manufacturers and sponsors) when compared to MotoGP.
Ezpeleta has openly disputed the future technical rules path for MotoGP with key bike supplier Honda. Dorna would like to regulate engine performance through electronics, while the manufacturers currently involved in GP — led by Honda — do not agree with Dorna’s technical direction.
When Honda recently announced increased support of the Netherlands-based Ten Kate Superbike squad and with this their re-signing of star competitor Jonathan Rea, it was viewed as a “shot across the bow” of Dorna. Some observers consider MotoGP a parade lacking close competition, while supporters suggest that the technical sophistication of the Grand Prix bikes adds to the allure of their tour.
World Superbike, under the popular long time leadership of Paolo Flammini, has managed to build a solid relationship with six current sponsoring manufacturers. In 2012, the eni Superbike World Championship crown went to Max Biaggi by just .5 of a series point after 29 races, and an impressive nine riders won Superbike events this season. Flammini will no longer be involved in the SBK series, and new rules expected for 2014 will severely limit the specification of the street-based 1000cc machines used in that championship. Saskatchewan’s Brett McCormick became the first Canadian riding full time in a World Championship in 20 years with his injury-affected 2012 campaign for the Effenbert-Liberty Ducati SBK squad.
In a release posted on several financially-related sites on October 26, CPPIB’s senior vice-president of private investments, Andre Bourbonnais, explained that “what really drew us, I think, was the thesis behind tier one motorsports because they can really draw a premium in terms of viewership, broadcast rights and advertising… We look forward to working with Dorna’s CEO, Carmelo Ezpeleta, his management team and Bridgepoint to continue Dorna’s global growth and to purse exciting opportunities to expand into emerging markets.”
A Canadian financial insider with knowledge of CPPIB, but not this specific motorsports buy-in, commented that “this is not a typical deal for them, CPPIB are regarded as good stewards, and they don’t just throw money out there. CPPIB have $165.8 billion CDN in assets, and about half of that is equity.”
“They have probably been in the background of the Dorna deal for six months, and this is not a big chunk of change for them,” the Canadian financial industry source indicated. “It’s an investment, but it wouldn’t be a Board decision, it would be made by a specific committee. The committee would have seen all the numbers, they know what to ask and what to do. They definitely see something in this that makes it specifically appealing. They’d be looking for around 12% return, that’s the high end for this type of investment.”
Investments by similar public-related groups are not unheard of. The Ontario Teachers’ Pension Plan owned a controlling interest in Maple Leaf Sports & Entertainment, owner of four teams in Toronto including the NHL’s Maple Leafs, for several years.