Bernie Ecclestone, one of the most powerful men in auto racing, is selling up to half of Formula One Administration the company that oversees the sport for $1.3 billion.
Morgan Grenfell Private Equity, the investment arm of Germany's Deutsche Bank, confirmed Tuesday that it will buy the stake in Formula One Administration's ultimate holding company, SLEC Holding. SLEC is owned by an Ecclestone family trust.
Morgan Grenfell will pay $325 million for 12.5 percent of the company, said a source close to the deal who spoke on condition of anonymity.
Morgan Grenfell also is taking an option to purchase an additional 37.5 percent of SLEC valued at $975 million, the source said.
Ecclestone has long indicated a desire to sell shares in Formula One to the public.
By selling part of SLEC to Morgan Grenfell, Ecclestone would broaden F1's ownership base before any such move.
Morgan Grenfell plans to invite other investors to take shares in the transaction, it said in a statement.
The source said that one potential investor expressing strong interest in part of Morgan Grenfell's 37.5-percent optional stake is the private investment unit of the family behind Italy's Benetton clothing business. Benetton owns an F1 team.
"Formula One is the world's leading sporting brand name," Morgan Grenfell director Scott Lanphere said in a statement. "It attracts more viewers than any other annually held event."
The size of the deal, which still must meet regulatory approval, suggests that Formula One Administration's total value is $2.6 billion.
The 67-year-old Ecclestone tried to make an initial public offering of shares two years ago.
The effort failed, however, when potential investors were worried by a European Commission probe into television contracts reached by the Federation Internationale de l'Automobile, which governs F1.
Formula One Administration, which holds the television rights to the races, is one of two Ecclestone companies under investigation. The other is International Sportsworld Communicators, which has broadcast rights for other motor sports events.
The investigation by the European Commission, the European Union's administrative body, led to an initial finding four months ago that Formula One's television deals violated EU competition law.
The commission said that if Formula One promoters were found to have abused their dominance in the sport to restrict competition, the sport's TV contracts would have to be renegotiated.
Ecclestone has said he will issue shares to the public once the investigation ends.
Morgan Grenfell is buying its stake despite the continuing investigation.
Formula One posted sales in 1998 of $400 million, and a profit of $193 million.
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