John Malone doubles downs on high-speed stakes

Liberty Media

01/04/2024 18:12

(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
       NEW YORK, April 1 (Reuters Breakingviews) - John Malone
has a need for speed. The media mogul’s Liberty Media  FWONA.O 
agreed on Monday to buy the Spanish company Dorna Sports, the
parent of the motorcycling racing championship MotoGP, for an
enterprise value of 4.2 billion euros. Liberty, which already
owns Formula One, doesn’t expect cost savings for smashing the
two races under one roof. Rather, the trick for Liberty’s latest
acquisition to hit its financial mark is to rev up revenue and
slash costs at the standalone company. It’s hard to see how a
deal adds value.
    The price for MotoGP is expensive: It represents 23 times
EBITDA of 179 million euros last year. With no cost cutting to
speak of, an estimated 29 billion in operating profit taxed at
Spain’s 25% rate would result in a paltry 1% return on invested
capital.
    Liberty also paid a rich price for F1 when it acquired
majority control in 2016. Malone’s company has helped F1 nearly
doubled its revenue to $3.2 billion by expanding the races and
hooking new brand sponsors. Even that sort of growth won’t get
MotoGP’s return above the seller’s estimated weighted average
cost of capital. In fact, operating margins would also have to
go from a measly 6% to 40% for the deal to start to make sense.
Malone may be off to the races – shareholders might prefer the
brakes. (By Jennifer Saba)
    Follow @Breakingviews on X
    
    Capital Calls – More concise insights on global finance:
    Too early to bank on Shell's Russian cash  urn:newsml:reuters.com:*:nL3N3G4306
    Obesity drugs inch closer to outsize expectations
 urn:newsml:reuters.com:*:nL3N3G033D
    Fed’s Powell loses chance to muddle inflation goal
 urn:newsml:reuters.com:*:nL3N3FQ3QU
    Europe’s paper M&A chase is predictably fiddly  urn:newsml:reuters.com:*:nL3N3FM2LR
    Reddit lives or dies by the meme  urn:newsml:reuters.com:*:nL3N3FJ4LO

 (Editing by Lauren Silva Laughlin and Aditya Sriwatsav)