Liberty Media’s $4.4 Billion MotoGP Deal Hits a European Roadblock

Liberty Media’s ambitious plan to acquire an 86% stake in Dorna Sports, the rights holder of MotoGP, has been met with resistance from European Union antitrust regulators. The deal, initially announced in April, carries a price tag of 4.2 billion euros ($4.4 billion), with the equity value calculated at 3.5 billion euros after excluding Dorna’s 14% stake.

Despite Liberty Media’s sale of a substantial $825 million stake in Formula 1 to fund the purchase, the EU‘s regulatory hurdles pose to be a wrench in the company’s plans, according to a report from Bloomberg.

The European Union’s investigation reflects concerns over potential anti-competitive effects, especially focusing on the broadcasting and streaming sectors. The consolidation of two major motorsport entities—Formula 1 and MotoGP—under Liberty Media could theoretically disrupt the market and stifle competition in media rights and content distribution. Heading the regulatory charge is Teresa Ribera, the EU’s new antitrust chief and Spain’s deputy prime minister.

This scrutiny is not without precedent. Similar apprehensions were evident in 2006 when CVC Capital Partners faced regulatory demands to divest from MotoGP during its acquisition of Formula 1. In the current scenario, EU regulators intend to launch a “Phase 2” investigation by December 19, necessitating a more exhaustive examination of the potential market implications of Liberty Media’s proposed acquisition and extending the review period by approximately 90 working days, with additional queries potentially prolonging the timeline further.

Liberty Media, known for its successful ownership of Formula 1, is navigating these regulatory waters with cautious optimism. Greg Maffei, the company’s former CEO, expressed confidence in addressing the EU’s concerns.

“We are very confident we will get this through regulators because we believe there is a broad market for sports and entertainment properties, of which both Formula 1 and MotoGP are only a small subset, and the market has continued to change from the time when the market was previously reviewed in a major way.” Maffei further clarified Liberty Media’s stance on market presentation by assuring, “We are going to not treat these as a bundle or try to bring them together in the market.”

By securing all the necessary financial arrangements to facilitate the acquisition, Liberty Media aims to close the deal by the end of 2024. The transaction includes refinancing efforts on the Formula 1 debt facilities. Whether these moves suffice to meet regulatory approval remains an area of intense speculation.

The implications of this acquisition stretch beyond regulations and into interesting market dynamics. MotoGP and Formula 1 maintain overlapping fanbases and share global broadcasting arrangements. The potential unification under Liberty Media raises questions about the concentration of media rights in one entity, which could impact competition and alter the industry for broadcasters and streamers worldwide. Liberty Media’s strategy involves a mixed financial approach, incorporating both cash and shares of Series C Liberty Formula One common stock to acquire Dorna Sports.

The potential impact of the proposed acquisition has broader significance for the sports and entertainment sectors. If approved, the completion of the deal could serve as a catalyst for more substantial consolidations in sports broadcasting, potentially prompting regulatory bodies to rethink their approaches toward mergers. With both MotoGP and Formula 1 possessing international audiences and lucrative sponsorship agreements, the outcome of this venture holds significant repercussions.