Two wheels good for CVC investors

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The Independent Online

The firm will make the return when it sells its majority stake in Dorna, the rights-holder to MotoGP, motorcycling's equivalent of Formula One.

Six venture capital companies - Permira, PAI, Advent, Apax Partners, Bridgepoint and Lion Capital - are understood to be meeting Dorna representatives at today's British Grand Prix in Donington. They will then have 10 days to make an offer, expected to be in the region of €500m.

The European Commission forced CVC to sell Dorna to avoid competition concerns after it bought a majority stake in Formula One. CVC acquired Dorna in 1998 for €78m. The bulk of the payment was thought to have been funded through debt, with CVC investing just €17.9m. It took a 75 per cent stake; remaining shares are in the hands of management.

Although financial information is not available, sources say Dorna's earnings before costs more than doubled from €14m in 1998 to €34m in 2004, on turnover of €102m. Its strong cashflow has allowed it to be recapitalised several times. This has already re-paid €150m to CVC, giving it a rate of return of over 800 per cent. By comparison, CVC's stake in William Hill had returned 314 per cent by the time the bookmaker was floated in 2002.

Dorna owned a variety of sporting rights but CVC stripped out the loss-making ones and focussed the business on MotoGP. It built up MotoGP's portfolio by adding new circuits, improved contracts with broadcasters and brought new sponsors on board.

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