Again we are hearing rumors. This time the subject of the whispered voices was not some new secret motorcycle model or a world-renowned racing celebrity changing race teams. No, this idle chat concerns the owners of the entire MotoGP World Championship series, Dorna, and their owners, London-based investment group Bridgepoint Capital. Apparently, MotoGP is up for sale and it may actually go through in early 2011.
Bridgepoint Capital previously picked up Dorna from another investment company, CVC, for what seems like a paltry €450 million (~US$591 million at the current exchange rate, which has fallen some in recent years). CVC would not miss MotoGP as they now own the Formula 1 Championship. Investment firms are always buying and selling the companies they own, so such a sale is not unusual. However, due to the recent economic decline, many such companies are holding on to their investments a bit longer in order to see their valuations become more reasonable.
MotoGP, though, has a different timeline; the costs of putting on the show are not declining in synch with the incomes of many corporate sponsors and the star of the MotoGP show, Valentino Rossi, only has at most a few years left in the series. To those in power at Dorna, that means that MotoGP will see tightening sponsorship budgets and can only benefit from Rossi’s popularity for a little while longer.
Even Dorna chief Carmelo Ezpeleta has become exceedingly aware of the cost issues, the shrinking grid in the Blue Riband MotoGP class, and the fact that Rossi will be retiring at some point sooner rather than later. Given that Ezpeleta is a major investor in Dorna, he also has a vested interest in this potential sale of the property.
In its favor, the new Moto2 class had so many entries this season that teams had to be turned away. Moto3, the replacement for the 125cc two-stroke Grand Prix class which will run 250cc four-strokes in 2012, is also seeing serious interest at this point. The costs of switching the former two-stroke classes to more modern four-stroke technology are a drag on the overall financial situation, but the rewards should be very good. The problem is that it takes time to recoup the costs before Dorna starts seeing revenue from the changes. One helpful part of this is that TV ratings are improving in almost all markets and attendance at the races has only slightly decreased in hard-hit economies or has actually improved in nations where the Great Recession has not been so rough. This is all-important for the valuable sponsorship dollars that both race teams and Dorna need to remain solvent and/or profitable.
The question which strikes right at the heart of this matter is just how much is Dorna, with its MotoGP property, worth to investors? So far, offers have already been made in excess of the price Bridgepoint initially paid – a primary interest of investment companies is getting their money back, at minimum, and they must pay back the banks from which they borrowed for the purchase – but nothing has been agreed upon that anyone knows of yet; it’s still early.
Many insiders and experts in this field have stated that MotoGP will be a hard sell unless there are significant spikes in revenue and popularity and the economy begins a strong recovery. Again, the motorcycle industry must take a wait-and-see attitude and hope that all will work out well. Even if Dorna is purchased by another investment firm, don’t expect much to change in MotoGP; all it will likely mean is that the name on the ownership documents will be different.
Written by J.C. Current, Courtesy of AllAboutBikes.com