"Supercars runs into financial issues after rejecting takeover bid from European investment consortium
Investors in the Supercars motor racing series are hoping their funds do not go up in smoke.
...EXCLUSIVE
JOHN STENSHOLT
EDITOR, THE LIST
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2 HOURS AGO JULY 20, 2022
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The privately owned Supercars series recently rejected a takeover offer that would have delivered shareholders a 20 per cent return in only nine months, and a board member has since had to tip in $10m to shore up its short-term finances.
Sources have told The Australian that Supercars, the popular motor racing circuit that includes the iconic annual Bathurst 1000 race each October, also needs to raise $10-12m in fresh capital from existing or new investors by the end of the year.
The offer by European media and entertainment business FanTech included buying out shareholders, taking on $45m debt and the obligation to pay Supercars team owners about $17m annually calculated on a per car basis.
Supercars is owned by Racing Australia Consolidated Enterprises (RACE), a consortium led by former QSM Media boss and now Supercars chairman Barclay Nettlefold and also including the Domazet family, the Canberra-based owners of hotel and property business Doma Group, Melbourne advisory firm Henslow and other motorsports series owners.
The RACE board recently rejected the FanTech offer that sources say was worth 20 per cent more of the value of the equity component of the transaction used to acquire Supercars from private equity firm Archer Capital last year.
In a statement, Mr Nettlefold told The Australian that RACE “has received a number of unsolicited approaches,” but did not comment directly on the FanTech offer.
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“Whilst the Board owes a duty to its shareholders to consider any approaches, none have progressed. RACE acquired the business on the basis of a long-term investment in the sport and remains committed to being long-term owners,” he said.
The FanTech offer would have united several racing series given it would have also included the circuits owned by Australian Racing Group (ARG), such as SpeedSeries, TCR Australia, Touring Car Masters and GT World Challenge Australia.
RACE bought Supercars last November from Archer Capital, which had owned 60 per cent of the series for more than a decade, in a $70m equity and debt transaction.
There is a $25m equity component to the valuation, while Supercars also has $45m in debt used to finance the acquisition using a six-year 6.25 per cent secured note issued by FIIG Debt Capital Markets last year.
Supercars has at least 13 races on its schedule this year, including Bathurst in early October and the popular Gold Coast 500 later that month.
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While Supercars achieves strong television ratings on Foxtel and Seven Network, the circuit’s owners are understood to have had some short-term funding issues, which has led to the Domazet family providing a $10m loan to help with cashflow.
Mr Nettlefold said RACE “is a privately held company and does not comment on its financing” but added “Supercars is a profitable business and RACE (and its shareholders) are long-term investors in the sport.”
“In addition, RACE sees substantial upside in the sport with the continued investment in the business, the people, the teams and the sport,” Mr Nettlefold said.
“We are pleased to say that since acquiring Supercars, all key indicators of the business are encouraging, including ticket sales, hospitality and sponsorship, which are all tracking well ahead of pre-Covid numbers.
Jure Domazet, a former member of The List – Australia’s Richest 250 with his father Ivan, is the managing director of the family business Doma, which has commercial and residential property projects in Canberra and Newcastle and owns hotels such as Little National Sydney and Hotel Realm in Canberra.
An additional and fresh capital raising of $10-12m from investors could dilute existing shareholders.
ARG is also a Supercars shareholder and is owned by Brian Boyd and John McMellan from Payce Property and Payce Security, along with well-known racing identities Garry and Barry Rogers.
FanTech is led by Belgian Wim Ponnet, the former chief strategy and commercial officer of global television and distribution giant EndemolShine Group, and its executive ranks includes ex-rugby union administrator David Gibson.
The FanTech offer was received by the Supercars board in recent months, and it is understood the group was allowed to undertake due diligence before a firm offer was lobbed.
But the bid was rejected, and at least one or potentially multiple shareholders are now disenchanted with management and the Supercars board and could walk away from motorsport.
The shareholders’ stake could be bought by other existing investors, or be offered to an external party by Henslow.
Supercars has been hit by Covid disruptions in recent years, but documents seen by The Australian show that the series recorded “EBITDA before appearance and grid fees” of $23.8m from $118m revenue in 2019, the last completed year of racing that was not interrupted by the pandemic.
An information memorandum circulated by Henslow at the time of the deal last November had a range of financial projections, ranging from a low base scenario of earnings before interest and tax of $7.4m from revenue of $110m, and after $17m was distributed to teams, to a high of $12.3m EBIT and revenue of $124m with distributions of almost $20m.
The $45m debt used to buy Supercars last year was raised on the bond market by fixed income firm FIIG, which said that “acquisition funding is unusual in bond markets” in a statement about the transaction on FIIG’s website.
JOHN STENSHOLTEDITOR, THE LIST
John Stensholt joined The Australian in July 2018. He writes about Australia’s most successful and wealthy entrepreneurs, and the business of sport. Previously John worked at The Australian Financial Review an... Read more
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https://www.theaustralian.com.au/business/supercars-runs-into-financial-issues-after-rejecting-takeover-bid-from-european-investment-consortium/news-story/b7798423cc98773ab4a25b85904c3155I don't know how true this is. Media posted approx 6 pm Wed 20/07/2022
