According to a Sky News exclusive, the Teacher’s Retirement System of Texas(TRS) is on the verge of gaining a 3% stake in Formula One. This comes just weeks ahead of the inaugural grand prix in Austin but it isn’t a far-fetched notion. The TRS has been investing with CVC Capital, the largest shareholder in F1. CVC is said to have brokered the deal for TRS and it equates to a $200m deal.
The deal originated as a part of TRS’s claim to the estate of Lehman Brothers which is the investment bank that went bankrupt in 2008 and signaled the beginning of the economic meltdown. Lehman Brother’s estate currently holds a 15% stak ein F1. As a matter of process, the series of F1 was valued at $7bn and the TRS investment will gain the retirement system a 3% stake in Delta Topco which is the holding company for F1. Sky News says the TRS has been a very successful investor in private equity opportunities and it’s coffers are massive:
“More than 1 million current and retired teachers are members of the state’s pension fund, which had more than $106bn (£66bn) invested at August 31 last year, about half of which was in private equity, according to the TRS website.”
Teachers became the topic of political conversation in opposition to the Formula One being backed by the states Major Event Trust Fund to the tune of $25m per year with politicians claiming the money, in these hard economic times, could be used for teachers and education. The investment joins a previous sale of shares to BlackRock and Waddell & Reed at $1.8bn for 23.6% of F1 shares combined. Norges Bank Investment Management invested $300m for a 4.2% stake. CVC is rumored to have had a multi-million dollar fee for arranging the investment for TRS.
One talking point that has certainly waned in the bright light of the Concorde Agreement discussions is the notion of the teams having an equity position in F1 as well. When Ferrari and Red Bull left the Formula One Teams Association at the end of 2011, the rumor was they were being lured by F1 boss Bernie Ecclestone with a possible equity position in the series but to date, no formal announcement has been made.
Retirement funds are designed for the teachers that have worked in the education system and retired. The investments are made to maximize the funds on the organizations behalf. According to their own 2008 investment overview document, they were positioning themselves for more global investments and among those partners chosen to handle the investments were Lehman Brothers as well as BlackRock. A little more about the retirement trust:
- The market decline ended and reversed course, sending the overall Pension Trust up 17.8% per year for the past three years ending March 31, 2012
- The TRS Trust earned $45 billion over this period, more than fully recovering the investment losses incurred during the financial crisis
- The TRS Trust ranked in the top 15% of comparable funds on an absolute return basis according to TUCS
- The TRS Trust ranked in the best 5% on a risk-adjusted basis according to Hewitt EnnisKnupp
- The value added for TRS members over the median fund exceeded $5.5 billion, sourced roughly equally from an improved investment policy and very professional execution across a host of independent investment strategies
Our friends at teh Statesman quoted the TRS via a statement about the investment in which they made it clear they are not investing in any facilities such as the Circuit of the Americas:
“Now the teachers win when F1 makes money and when new dollars come into our state as a result of the Grand Prix,” said Circuit of the Americas Chairman Bobby Epstein.
TRS stated, “To be clear, F1 is a completely separate company that is unrelated to Circuit of the Americas, which will host an F1 Grand Prix race near Austin in November 2012. None of the Teacher Retirement System of Texas, CVC Capital Partners, or Formula One Group has any ownership interest or business relationship with the Circuit of the Americas.”
No official word on the status of the investment as of Wednesday evening but suffice to say, while Bernie Ecclestone is the titular head of F1, there is little doubt he has a lot of company in the boardroom these days.