Tavo Hellmund Brings Formula One To Mexico City In 2015

Posted by: : Paul EbelingPosted on: August 25, 2014 Tavo Hellmund Brings Formula One To Mexico City In 2015

Tavo Hellmund Brings Formula One To Mexico City In 2015

In July it was announced that the Mexican Grand Prix will return to the Formula One schedule in Y 2015 after a 23-yr absence.

It is the 2nd time that American autosport entrepreneur Tavo Hellmund, 48 anni, brought a race to F1, he is also the force behind the United States Grand Prix in Texas.

In F1’s 64-yr history no one except for its CEO Bernie Ecclestone, 83 anni, has been responsible for putting more than 1 Grand Prix on the calendar.

The races in Mexico and the US will generate just over $1-B in revenue for F1’s parent company Delta Topco over the lifetime of the contracts.

The US Grand Prix has a 10 yr term with a hosting fee that started at an estimated $25-M, and has an escalator in its contract that increases the cost by10% every year, meaning that the revenue from the fee alone comes to a total of $398.6-M.

Delta Topco will collect the revenue from the Paddock Club, a elegant tented corporate hospitality space at each Grand Prix. A 3-day ticket typically comes to around $4,600 and the prices increase by roughly 0.7% annually meaning that by Y 2021 it is expected that the US Grand Prix Paddock Club will be making around $4.4-M giving a total of $42.3-M across the race contract.

Delta Topco’s third revenue stream from F1 races is fees paid by brands which advertise on billboards around the race course.

Last year 6 companies had trackside advertising at the US Grand Prix including Rolex and UBS the Swiss bank. Together the 6 sponsors paid an estimated $7.5-M, slightly lower than average as the US race does not have a naming rights partner. This gives a total of $75-M over the 10 yr contract bringing F1’s take from the US Grand Prix to $509.6-M.

Mexico has a 5-yr hosting contract with an option for a 5 yr extension. The annual hosting fee comes to around $23-M, and it escalates by 10% every year which brings the fee income to a total of $392.3-M.

It is thought that the Mexican Grand Prix contract gives the organisers the right to retain a percentage of the income from the trackside advertising and the Paddock Club.

As with the US Grand Prix, these revenue streams will come to around $117.3-M over the duration of the contract giving an overall total of $1-B in revenue from the 2 racing events.

F1’s single largest shareholder is the private equity firm CVC which has a 35% stake in Delta Topco.

CVC manages several funds which buy stakes in businesses and each has separate limited partners investors, their names are confidential. According to CVC’s website the investors in its funds comprise 300 institutional, governmental and private individuals. They get a return on their money when CVC sells its investments or takes dividends from them. F1 is a top performers.

The race series was bought for $2-B in Y 2006 by CVC’s investment Fund IV. The California Public Employees’ Retirement System (CalPERS) which is the largest pension fund in the United States and is owned by the State of California is an investor in the fund.

Data from CalPERS shows that it invested $350.1-M in Fund IV and has made a 1.8X return on its money.

F1 contributed a large amount of this money, as CVC has recieved $4.4-B of cash out of the business giving it a return of 350%. That according to the memorandum for Fund IV, the Limited Partners get all of the profits until they have got their money back after which time they get 80%, CVC retains 20%.

The Grand Prix’s in the US and Mexico benefit the state of California through CalPERS.

The Mexican Grand Prix is a homecoming of sorts for Mr Hellmund. His late father, Gustavo Hellmund-Rosas, was president of the organising committee for the race when it returned to the F1 calendar in Y 1986 after a 15 yr absence.

Mr Hellmund had an early induction into Grand Prix promotion through his father’s event business which was also involved with running all the IndyCar races in Mexico in the early 1980s and the World Cup in Y 1986. Mr Hellmund got involved with all aspects of the company from ticket taking and sweeping to activation and promotion on the operational side early in life.

He then went to work for Mr Ecclestone’s Brabham F1 team, and went on to become a racing driver, his father and Mr Ecclestone were close friends. But, his firs love is event promotion. Driving F1 racers was beyond Mr. Hellmund’s abilities.

In the early 1990s he founded a campaign called ‘safe and sober’ that involved racing drivers attending schools to educate pupils about wearing a seat belt and not drinking and driving.

He founded the program with help from General Motors (NYSE:GM),  and a group of Chevrolet dealers in Texas. The aim was to drive awareness of the importance of a seatbelt and not drinking and driving. The initiative grew into a year-round after-school program called Racing For Education. It expanded to being a state-wide campaign and was so successful that Mr Hellmund was commended for it by the then-US President George W. Bush.

Promoting an auto race was next step and in Y 2004 Mr Hellmund’s company Full Throttle promoted the ‘Texas Racefest’ in Austin. It sold out due to it being the only event combining a Grand National NASCAR race with a meeting of the USAC Midget Car series.

 In Y 2007 Indianapolis 500 and  F1 paarted, this was the moment for Mr Hellmund’s to bid bring ing the US Grand Prix to Texas.

During that year he designed the Circuit of the Americas in Austin, and in Y 2008 he engaged German track architects Tilke to do the engineering for the race course. Thus, making it ready for Mr Hellmund to finance it.

In Y 2004 the government in Texas had passed a bill to create a fund for attracting major events to the state, such as the Superbowl, World Cup and Olympics.

Formula One was not on Texas’ list.  He applied for F1 to be included and soon it was. The state’s support helped the US Grand Prix get the “Green Light” and in Y 2010 Mr Hellmund inked the F1 contract.

There have been other attempts to launch new F1 races in the US, but only Mr Hellmund has succeeded.

Then came the bid for a F1 race in Mexico under a management team driven by 2 Key figures; Mr Hellmund, Alejandro Soberon, CEO of the world’s 3rd largest live entertainment company Corporacion Interamericana de Entretenimiento (CIE).

They are supported by 3 team members including Carlos Slim Domit, the son Carlos Slim and has a great deal of auto sport experience through sitting on the Senate, the decision-making body of auto racing’s governing body the Fédération Internationale de l’Automobile (FIA).

The remaining team members are George Gonzalez, CEO of CIE subsidiary Ocesa, and Federico Alaman, president of motorsports for Ocesa.

The Mexican Grand Prix will put the country on the global sporting map alongside Shanghai, Singapore and Monaco and will be seen by a global television audience of 450-M. 

Expect the Grand Prix of Mexico to be a huge success.

Note:  Bernie Ecclestone has settled the bribery trial in Germany last week, thus avoiding any problems that might have followed to Formula One. The fine was $100-M, and no admission of guilt by Mr. Ecclestone.  In his closing remarks Judge Noll said that “the charges could not, in important areas, be substantiated.” Perhaps the amount will be taken as a charitable deduction by Mr. Ecclestone.

Stay tuned…

This story was reported in Forbes Magazine on 23 August, with contributions by Christian Sylt

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Paul Ebeling, Editor

 

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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