Under the skin of MotoGP

With the 2010 MotoGP season getting underway last month The Paddock takes a look at the financial horsepower behind the series.

When private equity firm Bridgepoint Capital acquired MotoGP’s rightsholder Dorna Sports from CVC for nearly €500m in 2006 it was clear that the motorcycle championship had come of age.

CVC made a return of over 20 times the investment it made when it bought Dorna for €78m from Spanish bank Banesto in 1998. It is believed that the bulk of the payment to Banesto was funded through debt with CVC investing just €17.9m for a 75% stake and the remaining shares going to Dorna’s management. The European Commission forced CVC to sell Dorna when it bought its stake in Formula One and despite the huge return it made on exit, it is one investment which it will regret losing.

CVC had built up MotoGP’s portfolio by adding to its calendar new circuits such as the US, China and Qatar. New improved contracts were signed with broadcasters, including the BBC, Germany’s RTL and Spain’s TVE, and new sponsors came on board. But perhaps CVC’s greatest gains came from Valentino Rossi, the charismatic Italian rider who became a motorcycling icon by winning four back-to-back world championships from 2002.

Thanks to Rossi, the popularity of the two-wheeled sport and the value of its media rights soared and in some European countries, such as Spain and Italy, MotoGP is now almost as popular as F1.

The headline figures about MotoGP which Dorna released to the public show the level of support that the series has garnered from fans. Its 18 races are now watched on television by a total of 5.1bn viewers in over 200 countries. With the bulk of the series' revenues coming from TV rights sales it should translate into high turnover but since Bridgepoint keeps such a tight lid on Dorna's finances it has been hard to say precisely how much money it makes. Until now.

The Paddock has got hold of Dorna's latest accounts for the year ending 31 December 2008 and the results show that MotoGP's growth has started to slow down.

In 2008 Dorna's turnover nudged up 2.8% on the previous year to €154.5m. The number of races on the calendar didn't rise during the year but the slight boost in revenue can be explained by the Turkish Grand Prix being replaced with a second race in the US at the massively popular Indianapolis Motor Speedway. Dorna's revenue is six times smaller than that of F1's rights holder Delta Topco but it shares similarly high margins with an operating profit of €51.1m. However, as with most private equity buyouts, Dorna's bottom line is weighed down by interest payments on the debt used to fund its acquisition.

According to Dorna's accounts, the company has €468m of long term debt and paid interest of €46.7m in 2008. This put huge pressure on the bottom line and explains its €5m after tax loss. Bridgepoint is Dorna's biggest shareholder, with a stake of 64.2%, and despite the red ink on the accounts, it isn't losing out. Once Dorna is debt free the company can secure another loan which would give the shareholders a payout.

The majority of the minor shareholders are the company's management and since the debt decreased by €100m in 2007 it shouldn't be long before they get a windfall. Carmelo Ezpeleta, Dorna's chief executive, is the largest of the personal shareholders and his 15.07% stake in the company is even larger than the 5.3% Bernie Ecclestone holds in Delta Topco.

In contrast to F1, circuits which host MotoGP can actually make a profit. The British Grand Prix brought Donington Park €4.4m in 2008 and a further €3.9m the following year. Keeping the circuits happy has given MotoGP a more stable calendar than that of F1 and it could be the key to the series' future. Increasing hosting fees would enable Dorna to boost through the current lull and accelerate its growth. It may have an uphill climb ahead of it but Dorna is already well on the way.