The Canada Pension Plan Investment Board made two bets on the motor racing market last week, acquiring a 39 percent stake in Madrid-headquartered sports management company Dorna Sports and investing $400 million in a high-yield loan to CVC-backed Formula One Group.
Dorna owns the rights to organise motorcycle racing series the FIM Road Racing World Championship Grand Prix. Formula One generates much of its income through television and advertising revenues, as opposed to owning racetracks or racing teams.
Following completion of CPPIB’s investment in Dorna, which values the company at more than €1 billion, according to a source with knowledge of the situation, the pension plan will own the business alongside UK-based Bridgepoint and Dorna management. Bridgepoint acquired a “substantial controlling ownership” stake in the company in 2006 and will generate a return of more than 3x on the partial exit, the source said. Bridgepoint will continue to own more than 40 percent of Dorna, which recently acquired the FIM World Superbikes Championship, giving the business ownership of “the two pre-eminent motorcycle racing series in the world”, according to a statement.
“We look forward to working together with Dorna’s CEO, Carmelo Ezpeleta, his management team and Bridgepoint to continue Dorna’s global growth and to pursue exciting opportunities to expand into emerging markets,” senior vice president of private investments at CPPIB Andre Bourbonnais said in the statement.
CPPIB declined to comment further.
The pension plan’s $400 million investment in a $1 billion private high-yield loan to Formula One Friday is “one of the largest” it has done since it began investing in private debt in 2008, according to the firm.
CPPIB Credit Investments, the pension fund’s private debt management arm, made the investment. The loan matures in 2019.
This transaction is an excellent opportunity for CPPIB to participate in a long-term loan facility with attractive risk-adjusted returns
“This transaction is an excellent opportunity for CPPIB to participate in a long-term loan facility with attractive risk-adjusted returns involving an iconic global sports management brand that is superbly positioned for continued growth,” Bourbonnais said in a separate statement. “We successfully completed a financing agreement of this size, complexity and value owing to CPPIB's comparative advantages and internal expertise.”
Also last week, The Teacher Retirement System of Texas, a limited partner in a number of CVC’s funds, reportedly invested $200 million in Formula One, giving TRS a 3 percent stake.
CVC and its investment in Formula One have made headlines for a variety of reasons since last year. The firm was in the news in April due to rumoured plans to float Formula One on the Singapore stock exchange, though the company was never listed. Last year, a criminal prosecution was brought against Gerhard Gribowsky, a former BayernLB executive, for allegedly receiving a $44 million bribe in relation to the sale of Formula One to CVC in late 2005. Accountants Ernst & Young and law firm Freshfields Bruckhaus Derringer were understood to have given CVC a clean bill of health with regard to the deal, though last week new reports emerged that BayernLB is demanding compensation based on claims that its shares were undervalued when it sold its stake to CVC.
CPPIB’s private debt arm has invested about C$9 billion since its inception in 2008. It has a loose target of $75 million to $500 million per deal, but has no specific annual target allocation.
CPPIB grew its private equity investment portfolio by roughly 6.5 percent during the second quarter of 2012 as it continued to pursue both new investments and add-on acquisitions.
The value of CPPIB’s private equity investments rose by C$1.7 billion (€1.3 billion; $1.7 billion) to C$28 billion during the three month period ending 30 June, comprising about 17 percent of the pension’s $165.8 billion total assets.