Liberty Media Offers Shares At A Discount To Get Funding For Formula 1 Acquisition

Wunderlich has maintained its Hold rating on Liberty Media Group LMCA, which brought more Formula 1 investors on board via $1.55 billion share sale at a discount.

Liberty issued shares of its Series C Liberty Media common stock at a price of $25.00 per share in connection with its acquisition of Formula 1. The $25 is a 19 percent discount to a $30.95 close on December 13.

The selling shareholders of Formula 1, led by CVC Capital Partners, will control near 39 percent of the new Formula One Group equity (the new Liberty post close). The new third party investors, including Coatue Management, LLC and the D.E. Shaw Group, will own approximately 26 percent.

Interestingly, the secondary sale was not a condition for the Formula 1 deal closing. In September, Liberty Media announced its decision to buy Formula 1 from a consortium of sellers, led by CVC, at an enterprise value of $8 billion and an equity value of $4.4 billion.

Meanwhile, analyst Matthew Harrigan said the market is not conferring near-term EBITDA multiples that fully recognize Formula 1's over-the-top/ augmented reality/virtual reality upside and other revenue drivers like pay TV and sponsorships.

Rating, Price Target And Valuation Commentary

The analyst, who has a price target of $31, noted that valuation assumptions off FTSE 100 provide $9.6 billion Formula 1 entity value, $6.4 billion equity value target in 2017 including new free cash flow.

Harrigan downgraded the stock to Hold in September, saying its stock price already largely reflects intermediate Formula 1 upside.

“Valuation sensitivities to revenue per race, total races, and post 2020 splits with the teams still show $45–$50 breakout potential,” Harrigan wrote in a note.

At last check, shares of Liberty Media were flat at $30.95.