Tuesday, August 30, 2011

Will Genii Capital sell the Renault F1 team?

It has been a star crossed year at Lotus Renault Grand Prix. High hopes were basically dashed when Robert Kubica was injured in a near fatal accident, their innovative forward facing exhaust apparently has not yielded the performance they hoped for, speculation about the team's financial problems and their cars catching fire like kindling. Now the battle with their current or limbo-driver Nick Heidfeld, who was demoted for Bruno Senna, is taking the team to court to keep his seat. The team is in a bit of turmoil but say they have been buoyed by the performance of the newly installed Senna for Belgian and Italian Grand Prix. Well, at least while legal issues around Heidfeld's demotion are sorted.

Even with this statement of boosted morale in the team, do Genii Capital sell a stake in the Renault team or do they sell it outright? Currently, Genii is the 100% owners in the F1 team and plan to be for "the foreseeable future" in their words. Which to me is "until the right deal comes along". The obvious question is who would be the buyers in a still recovering global economy? The obvious answer would be Group Lotus, who currently have a sponsorship arrangement with the Genii-owned Renault team and an option to purchase a stake in the team by 2012. However, there are questions about Group Lotus's spending habits in terms of new product lines, plastering their name in just about every race series, even though they report they are meeting financial targets. Group Lotus is not in the best financial shape so you must question how much borrowing is going on to finance such activities. Also, will their owners, Malaysian auto-maker Proton, fork over more money for them to have any stake worthwhile. Moreover, a maybe not so major aspect is Proton have to navigate the 1Malaysia program. A participant in that program is Tony Fernandes' Team Lotus F1 program. To what extent do they ignore Fernandes to support Group Lotus in direct F1 competition? The whole Group Lotus vs. Team Lotus naming issue is a completely another story.  I think Group Lotus to spread too thin to make and real investment into LRGP.

Does Renault buy back into the team? They just sold the remaining 25% share in the team to Genii last year and the current arrangement of Renault only providing engines and technical support while reaping the benefits of their name still on the car without incurring the huge costs of running the team is rather advantageous for Renault. It also frees them to focus more in-depth on the technical partnership with other teams, like Red Bull, Team Lotus, and soon Williams in addition to LRGP. So no.I think they are gone for good as full fledged team owners.

Does Brazilian money enter the equation to buy a stake in the team? World Wide Investments Group (WWI) may have some money to play with it. Earlier this month, Genii announced a joint venture with WWI in which the two companies will manage an investment portfolio totaling $10 billion USD. The joint venture's focus: private equity investments in energy, renewables, real estate, information technology, telecommunications, oil, gas and the automotive sector; most of which WWI already engages in.

Why would WWI bother? F1 is a global championship with huge opportunities for branding, investment, cross collaborations in a number of industries: communications, defense, info tech, manufacturing, green technology. Sounds like some synergies right off the top. Also, it creates more competition with Apex-Brasil, an trade and investment agency that views motorsport favorably and currently works with Indycar through 2012.

Moreover, a F1 tie up with Genii will also allow WWI to have an opportunity to create a connection with one of the most famous names in motorsports and one that holds saintly status in Brazil, Senna. With Bruno Senna now in the race seat for LRGP for the time being and potentially for the future with a promising performance in his first grand prix in about a year it makes sense. However, the complication is of course Robert Kubica. There is some mystery as to whether he will be fit enough to ever come back. If he doesn't, then a Vitaly Petrov/Bruno Senna line up works. If he is able to return do they ditch Petrov's sponsorship portfolio or keep themselves out of the F1 ownership business if Senna has no seats? Maybe, as there is still plenty of investment opportunity without a near term Brazilian driver. 

If anything is to happen, you won't hear about it until there is some certainty around Robert Kubica's ability to return to F1. Regardless, I think there is going to be some interesting business deals coming down before 2012 season.

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