Revealed: Indycar’s Predecessor Made Bid To Buy Formula One

IndyCar’s forerunner, Championship Auto Racing Teams (CART), made a daring bid to buy Formula One in 1998 according to the boss of the series at the time.

If the maneuver to unify them had been successful it would have created a single seater open-wheel powerhouse which could have driven up F1’s popularity in the United States and prevented NASCAR from dominating the racing landscape there.

The driving force behind the bid was the flotation of CART. The series was formed by its team owners in 1979 and was then known as the Indy Car World Series. Fast forward to 1996 and Tony George, boss of the famed Indianapolis Motor Speedway (IMS), led a number of the teams to breakaway and form their own championship, the Indy Racing League (IRL).

It held its first race on the now-demolished Walt Disney World Speedway with the spires of Cinderella Castle shimmering in the background. CART continued as a separate championship which retained many of the top teams such as Ganassi and Penske. However, they had to qualify for a place in the Indy 500 whereas IRL’s teams were guaranteed to get in.

It fueled a rivalry between the two championships and CART turned to the markets to drive its growth. It listed on the New York Stock Exchange in 1998 which gave the team owners liquidity as they each had a stake in the series.

The company itself also raised capital in the Initial Public Offering (IPO) and this put it on the radar of investment banks who were prepared to offer it high-octane loans. CART needed to tell institutional investors what the money would be used for and one of the purposes was acquiring complementary race series. It lived up to its word.

CART bought two junior series, Indy Lights and the Atlantic Championship, and F1 was next on its list. “As a public company you have to make proper use of the funds available and we were throwing off a lot of money,” says Andrew Craig, who joined as CART’s chief executive in 1994. “We had over $100 million on the balance sheet and borrowing money was not difficult. We looked at a number of sports and thought we might as well see if Formula One was for sale.”

Few other managers have as broad an experience of high-level sport as Craig. The Briton began his career at Nestlé in the 1970s but his big break came in 1983 when he joined ISL which, at the time, was the world’s largest international sports event marketing company. As its deputy CEO he managed the International Olympic Committee’s worldwide sponsorship program and worked extensively on soccer’s World Cup and European Championships.

His contacts included senior executives at brands like Coca-Cola, 3M, Panasonic, Texaco, Visa and FedEx, which was CART’s title sponsor. During his six-year tenure Craig transformed CART from being a small privately-held club with annual revenue of $20 million and marginal profitability to a public company with $75 million in annual revenue.

This growth was driven by developments such as launching a licensing business, international races and expanding television coverage to more than 195 countries. Expanding internationally brought Craig into contact with Bernie Ecclestone the British businessman who turned F1 from an amateur past time into the world’s most-watched annual sports series. Ecclestone was in F1’s driving seat and his family trust owned the sport.

“I knew Bernie pretty well so we met in London to discuss CART buying F1,” says Craig. “To be frank I think he just wanted to see what we were saying and we never got anything out of him by way of numbers. He said he would send them to us but nothing ever appeared so we just walked away. I guess if we had said ‘here’s a check for a great number of billions’, he probably would have said yes.”

That is precisely the prize that Ecclestone had his eyes on. By 1998 he was 68 and suffered from heart problems which culminated in him having a triple bypass in 1999. Ecclestone’s outlook was far from clear so he wanted to leave a financial legacy for his 40 year-old wife and their two young daughters.

He hoped to float F1 on the London Stock Exchange but this got the red light due to an anti-trust investigation by the European Commission. It was fueled by complaints from the bosses of other race series who claimed that F1 was favored by its regulator the Fédération Internationale de l’Automobile (FIA).

The case was closed in 2001 but Ecclestone didn’t hang about for that. In 1999 he secured a $1.4 billion bond on F1’s revenues and over the following 20 years raised a total of $3 billion for himself and his Bambino family trust by selling stakes in the sport. The latest disposals came just three years ago when Liberty Media got the keys to F1 and finally listed it, this time on the Nasdaq with the ticker FWONK.

“I think Bernie’s primary motivation out of the meeting was partly curiosity because we had done something which he wanted to but never did, which is take the company public,” says Craig. “We had done that successfully and I think he just wanted to know what was going on but I don’t think quite frankly he ever had any intention of pursuing it.

He never sent me any financial information and I called him two or three times to ask for it.” Bambino sold its first stake in 1999 when former investment bank Morgan Grenfell bought 12.5% of F1 for $235 million putting a $1.9 billion value on the sport.

“CART would have borrowed the money to buy F1,” says Craig. “One of the great things about America is access to capital. We had a good track record financially. We went from basically making no money to throwing off $25 million a year pre-tax. We had $100 million on the balance sheet and were looking for things to acquire.

“We acquired Indy Lights. We acquired Atlantic and were looking for other acquisitions so it was natural to have a conversation about F1. We had just gone to market and raised money which raised the question of what we were going to do with it. It would not have been too hard to buy F1.”

He adds that acquisitions weren’t the only planned uses of the IPO funds. Another was so far ahead of its time that it has only just come into its own in the coronavirus lockdown when professional drivers began regularly racing in eSports competitions.

Craig explains that “one of the concepts in the IPO story was actually quite visionary. It was called ‘The 29th car’ because we had 28 cars running in the series. The 29th car was going to be virtual and it would have enabled fans to take part in our races online. However the technology wasn’t there. In theory it was possible but we would have needed to invested tons of money and time to make it a reality. Frankly we just had other priorities.”

It ended up being a blessing in disguise as investors became alienated by tech stocks when the internet bubble burst. CART already had an uphill struggle as Craig explains.

“Taking a sports company public is a little challenging because investors tend not to take sports that seriously as public companies. It was also at the height of the internet bubble which was near to collapsing. So in our presentations we said ‘we are a traditional industrial company, a manufacturing company. We manufacture and sell motor races’.

“We didn’t say ‘we are into the internet, we are into this and into that’. We presented it as a traditional business which manufactures and sells motor races and does it at a profit. And when we said that, all of a sudden people were interested so we started every presentation that way. That made the investors realize that we aren’t funny guys from sport, we are actually business people and it worked very well.”

It took a different approach to get the green light from the teams. Craig says that “in terms of getting the teams to see the merits in the IPO, the guy who really helped to get it over the finishing line was Roger Penske. To be very frank I wasn’t sure how the final board meeting on this would go. I thought the teams would probably say no but to my surprise they said yes and off we went.

“Prior to the float, the teams were shareholders in CART. There were 24 franchises and they had shares. You could only have two franchises and when we took the company public, they got I think $8 million per franchise. I remember Dan Gurney called me up and said ‘Andrew, I’ve just received a check from you for $16 million which is the biggest check I’ve ever received in my life.'”

Craig left CART in 2000 to launch his own marketing and consulting business which has worked with Olympic host nations and a wide range of F1 clients from the former Sauber team to the Sports Ministry in Azerbaijan. Craig advised them on how to turn the ‘idea’ of an F1 race into a contract that works for both parties.

Given his experience in the driving seat of a listed single-seater race series, Craig has been mentioned as a successor to F1’s current boss Chase Carey and ironically, that could see him dealing with IndyCar again.

CART collapsed three years after Craig left as a number of teams defected to IRL. It was later replaced by the Champ Car World Series but that too went bankrupt allowing IRL to purchase its assets and merge the two series into the IndyCar that is still around to this day. Last year it was sold, along with IMS, to Penske and after the deal closed, the Associated Press reported that Liberty Media had also been in talks to buy it. However, it added that “one person familiar with Liberty’s talks said the company balked at an initial asking price of $250 million.”

We forecast Liberty’s interest in IndyCar back in March 2017 in a report for Britain’s Daily Telegraph newspaper. Talking to investors, Liberty’s CEO Greg Maffei floated the idea of “potentially expanding Formula One into other motor sports…Ones where we have synergies.”

We wrote in the Telegraph that one possible target could be “IndyCar, a family-owned American rival to F1 which operates the famous Indianapolis 500 race and would boost the sport’s footprint in the US.”

Craig says it went to the right man. “Roger’s heart has always been with the Speedway and I think it is in very good hands. He loves that place and whatever Roger does will be to make it better.”

It brought an end to a twisting and turning story spanning two decades. To wrap it up, Penske helped smooth the way for the flotation of IndyCar’s predecessor CART which wanted to use the proceeds to buy F1. Ecclestone declined as he wanted to float F1 and get an even bigger payday. That too hit the skids so instead Ecclestone sold stakes in F1 which were eventually bought by Liberty. It listed F1 on the Nasdaq and hoped to buy IndyCar but was thwarted by Penske.

Liberty is reportedly considering hosting an F1 race at IMS following the failure to get a second US Grand Prix off the ground in Miami. Time will tell who is at the wheel of F1 if the race ever gets to the finishing straight.