Liberty Media Corp to Acquire Formula One- M&A Call
Sep 07, 2016 AM EDT
FWONA - Liberty Media Corp
Liberty Media Corp to Acquire Formula One- M&A Call
Sep 07, 2016 / 10:00PM GMT
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Corporate Participants
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* Courtnee Chun
Liberty Media Corporation - Senior VP of IR
* Greg Maffei
Liberty Media Corporation - President and CEO
* Chase Carey
Formula One - Chairman
* Albert Rosenthaler
Liberty Media Corporation - SVP and Chief Tax Officer
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Conference Call Participants
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* James Ratcliffe
Buckingham - Analyst
* Ben Swinburne
Morgan Stanley - Analyst
* Jeff Wlodarczak
Pivotal Research - Analyst
* Amy Yong
Macquarie - Analyst
* Barton Crockett
FBR Capital Markets - Analyst
* Bryan Kraft
Deutsche Bank - Analyst
* Jason Bazinet
Citi - Analyst
* Matthew Harrigan
Wunderlich - Analyst
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Presentation
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Operator [1]
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Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Media/Formula One call. (Operator Instructions) As a reminder, this conference is being recorded on Wednesday, September 7, 2016.
I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead.
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Courtnee Chun, Liberty Media Corporation - Senior VP of IR [2]
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Thank you. Before we begin, we'd like to remind everyone that this call will include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about the proposed acquisition by Liberty Media Corporation of Delta Topco and its Formula One business; the realization of expected synergies and benefits from the proposed acquisition; target potential future financial prospects; future business strategies and opportunities relating to Formula One, including promotion, marketing, new commercial partners, including sponsors; content distribution, changes to Formula One's race calendar, and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, the satisfaction of the conditions to the proposed acquisition of Formula One; our ability to realize the expected benefits of this transaction; market conditions and continued access to capital on terms acceptable to Liberty Media.
These forward-looking statements speak only as of the date of this call and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Media's expectations with regard thereto, or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly-filed documents of Liberty Media, including the most recent Forms 10-Q and 10-K for additional information about Liberty Media and about the risks and uncertainties related to Liberty Media's business, which may affect the statements made on this call.
Today our speakers on the call will be Greg Maffei, Liberty Media's President and CEO, and Formula One's new Chairman, Chase Carey. We've posted a presentation on our website and we will do a high-level review of the slides. Please note there is additional information provided in the appendix.
We will then open the call up to questions from analysts and investors. Please note we will not be taking questions from the press on this call.
Now I would like to introduce Greg Maffei, Liberty's President and CEO.
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Greg Maffei, Liberty Media Corporation - President and CEO [3]
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Thank you, Courtnee, and good evening to all of you out there and thank you for joining us. We are very excited to announce this agreement for Liberty to acquire Formula One. Formula One is an iconic sports business built over 67 years; has a massive fan base with over 400 million unique TV viewers globally and a highly, highly attractive financial profile. We are excited to become long-term owners of this strategic business and we are confident that our expertise in media, entertainment, digital and live events will prove additive to what is already an incredibly successful franchise.
I also want to thank CVC and Donald Mackenzie for their outstanding stewardship of this business, and we look forward to a continued partnership as our largest shareholder in the Formula One Group.
I'm also very excited that it's an opportunity for Liberty Media to reunite with Chase Carey, whose unparalleled experience, preparation, and abilities make him perfect for this role as Chairman of Formula One.
So let's turn to slide 6 and review the transaction. The assets and liabilities of Formula One will be attributed to the Liberty Media Group, which will remain a tracking stock of Liberty Media and is expected to be renamed the Formula One Group after the second closing, as I will discuss further. And we will have a new ticker for that tracker, FWON.
The transaction, which as I noted will be in two steps, values 100% of Formula One at an enterprise value of $8 billion and an equity value of $4.4 billion. The total purchase price has three components: $1.1 billion of cash; 138 million newly-issued, nonvoting shares of Liberty Media Group representing a total of $2.9 billion in equity as of the announcement based on the transaction reference price of $21.26; and a $351 million debt security issued by F1's parent HoldCo and exchangeable into Liberty Media -- LMCK -- Liberty Media nonvoting shares. This is an equity-like instrument that will convert out within 30 months.
The existing $3.6 billion of Formula One debt will remain in place and is nonrecourse to Liberty, and all of the cash at Formula One will also be attributed to the Formula One Group.
The first closing, which occurred today, of this two-step transaction, in it Liberty acquired an 18.7% interest in Formula One for $746 million in cash, which represents 18.7% of the total consideration to be paid less a $75 million discount to us, Liberty, which will be repaid at the second closing.
At the second closing, we expect to gain 100% of the shares, other than a nominal amount of shares held by certain F1 teams, and we will pay out the rest of the consideration, including the balance of the cash, the shares that we discussed above, and the $351 million debt security.
We expect the second closing to occur in the first quarter of 2017, and to complete the second closing we will require antitrust approval in select countries, a vote of the Liberty Media Corporation shareholders, and certain third-party consents including notably the approval of the FIA, Formula One's regulatory governing body.
So with that, let me turn to slide 7 and talk a little bit about Chase Carey. But first it would be impossible not to note that the long history of this franchise has been driven by the incomparable Bernie Ecclestone, an icon in motorsports and sports entertainment.
To further strengthen the great business he has built, Chase Carey today was appointed Chairman of Formula One. Now, many of you know Chase, as do we, and think he is uniquely qualified for this role with his depth of leadership in media and also in sports. Chase most recently served as President and COO of Fox. Along the way, he helped launch Fox Sports while he was CEO of Fox Television in 1994, a leader in global sports television -- in the global sports television industry. Chase has built regional sports networks and he has helped extend Fox's global sports franchise.
Previously, he was CEO of DIRECTV, the world's largest satellite broadcaster which was famous for its sports. And with that also happened to be 58% owned by Liberty at one point, which is how we got to know Chase quite well.
And with that, I'm going to turn it over to Chase who will provide a little more overview of Formula One.
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Chase Carey, Formula One - Chairman [4]
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Thanks, Greg. I'm very excited to be joining this team and for the potential ahead. This truly is a global business with 21 races across 21 countries in five continents. Every year the excitement builds at Formula One throughout the nine-month long championship series with the annual Constructors' and annual Drivers' Championships at the end of the season.
Clearly, Formula One has been an enormous success, much to the credit of Bernie Ecclestone who has led this business for decades. I look forward to working with him, and we both agree there's an opportunity to continue to build this business and take it to the next level.
Formula One is a key player in the high-growth market for live premium sports rights. There is an increasing demand from broadcasters, advertisers, and sponsors who want access to F1's mass global live audiences and attractive demographics. Formula One's March renewal with Sky was favorable compared to other renewals in the market and bodes well for Formula One's media rights portfolio.
For those of you that are new to Formula One, we provided an overview of the players in the ecosystem. It starts with the FIA, the governing body of F1, and involves Formula One, race promoters, race teams, and broadcast and sponsorship partners. Formula One is the exclusive commercial rights holder for F1 pursuant to the 100-year agreement which extends until 2110.
Formula One negotiates the race promotion fees, broadcast contracts, sponsorship partnerships, and handles race-day video feeds. The race promoters host championship races. They are a high quality mix of counterparties, including government entities. They handle promotion and execution of the race itself and receive income from ticket sales.
We were particularly attracted to F1 by the diverse revenue drivers and low-risk business model. There are essentially three core revenue buckets in the business: race promotion, broadcasting and advertising, and sponsorship, each with significant growth potential as we go forward.
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Greg Maffei, Liberty Media Corporation - President and CEO [5]
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So Chase mentioned the diverse revenue streams, and I think that was multiple revenue streams which have over $9.3 billion of contracted revenue under long-term contracts which extend out to 2026, with staggered renewals; and with many of the counterparties, including high-quality corporates and governments, create an incredibly low-risk business model. And when you combine that with the fact that our largest cost item is team payments, which are variable based on the revenues and profits of the business, it creates a model that we think is incredibly durable and strong.
When you flip to slide 13, you can see how that turns into incredibly strong cash flow. Formula One has extremely attractive EBITDA margins with over a 27% in the recent year. And if you pair that with the low capital intensity of the business, it leads to extremely highly unlevered cash flow conversion. It's virtually unparalleled to be able to bring as much cash to the bottom line as a percentage of EBITDA that Formula One does.
This durable business model, combined with the long-term contracted revenue and high cash flow conversion, enables the business to support relatively high financial leverage, a Liberty hallmark.
So let me turn it back to Chase and let him chat about the opportunities we see at Formula One.
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Chase Carey, Formula One - Chairman [6]
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So what do we see as the opportunity? The opportunity is to grow and develop the sport for the benefit of the fans, teams, partners and our shareholders by increasing promotion and marketing of Formula One as a sport and brand; enhancing the distribution of content, especially in digital, currently a very small percentage of revenue; evolving the race calendar; establishing a broader range of commercial partnerships including sponsorships; and leveraging Liberty's expertise in live events and digital monetization to make our events bigger than ever.
I will give it back to Greg to close.
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Greg Maffei, Liberty Media Corporation - President and CEO [7]
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Thanks, Chase. This scene on slide 15 is a scene that we hope some of you may recognize. It's from the Monaco race through the streets of Monte Carlo, an iconic event if ever there were.
When you sum up all the things we see in the business, I hope you are as excited as we are. We see a great business that has been extremely well run and more than successful, but with enormous opportunities ahead to expand and grow. We think we've been able to enhance management by attracting Chase, and add to a very strong team led by Bernie that is already there.
Liberty is a long-term owner and we aim to bring stability and success to the ownership of this sport. With that, operator, I would like to open up the call for questions.
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Questions and Answers
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Operator [1]
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James Ratcliffe, Buckingham.
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James Ratcliffe, Buckingham - Analyst [2]
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Thanks for taking the question. Two if I could. First of all, Chase, can you give us an idea of what the timeline looks like for the future major potential programming deals? You mentioned Sky was in March, but what the other major deals are and what the timeline for potentially leveraging that benefit is.
And also, it seems like a big portion of some of the revenue growth has been driven by moving races to markets that were willing to pay more for them. How much opportunity do you see on that front?
And I guess secondly, if I'm reading the numbers right, it looks like F1 in aggregate pays minimal cash taxes. Is that a scenario you'd expect to continue going forward? Thanks.
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Greg Maffei, Liberty Media Corporation - President and CEO [3]
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So, Chase, why don't you take the first and then I'm going to ask Albert to take the second.
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Chase Carey, Formula One - Chairman [4]
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Yes. I think in terms of timeline, the broadcast contracts are multi-year contracts, so obviously they don't come up year-to-year. And there are some coming up generally every year. It's not a straight line, but I think on average I think we put in 3 to 6 years as sort of the average of a contract; that was for the contracts around the world. So they're a large number.
So generally, you have a meaningful number of contracts in any given year, but certainly not the majority. They are spread out across that time frame.
In terms of developing markets, clearly new markets are opportunities. This is a global sport. We are excited about the opportunity to continue to grow the sport, expand the sport in places like the Americas and Asia, and think those are opportunities. But I want to be clear that certainly the established markets that have been the home and the foundation for Formula One, I guess Europe in particular, are of critical importance. And certainly building the sport in Europe and building on that foundation has got to be second to none.
So we do want to continue to take advantage of the global footprint of this sport and think there are those growth opportunities, but certainly do want to focus on it. Certainly markets longer-term, markets like the US and key Asian markets are an opportunity for us to develop.
They won't develop overnight, but there are huge audiences there that I think actually have a real appetite for the excitement, the stars, the teams, the brands, the technology.
And I think as we can develop and reach those fans using digital platforms and some of the tools that to date probably really haven't been exploited as aggressively, we can build a whole new generation of fans in places that have not historically been a significant part of the Formula One fan base.
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Greg Maffei, Liberty Media Corporation - President and CEO [5]
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Great, Chase. Let me also ask Albert Rosenthaler who runs corporate development for Liberty and has tax reporting attempt to chat about how we look at the tax status.
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Albert Rosenthaler, Liberty Media Corporation - SVP and Chief Tax Officer [6]
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From a tax standpoint, F1 has done a wonderful job in terms of creating a structure that is extremely tax efficient. We will be stepping into that structure. There are some changes on the horizon, broader changes from the UK perspective, that will have a modest increase in the amount of taxes going forward once those become law, but we think the structure is going to remain extremely efficient.
We also have managed to step -- do the transaction in a way that will permit an efficient repatriation of money back to the US without incremental tax for many, many years.
So we not only maintain the UK tax efficiency of their existing structure, also we will be able to repatriate cash to the US in the future, to the extent that seems to make sense, with no additional taxes.
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Greg Maffei, Liberty Media Corporation - President and CEO [7]
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Great. Next question, operator.
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Operator [8]
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Ben Swinburne, Morgan Stanley.
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Ben Swinburne, Morgan Stanley - Analyst [9]
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Good afternoon. It's Ben Swinburne. Chase, could you just talked a little bit about the relationship with the teams? I think the last Concorde Agreement runs out in 2020. Is there any change in the payout rate or any update in terms of the duration of that agreement as a result of this transaction?
And then, Greg, just on financing phase 2, I believe the slide suggests you are going to look to raise additional capital rather than use equity. Maybe you could just spend a little bit more time on how you are thinking about that piece of the puzzle and how much you think ultimately dilution versus other cash financing might play a role here as we get to phase 2 at the beginning of next year. Thank you.
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Chase Carey, Formula One - Chairman [10]
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The teams, there's not a change to team agreements that are in place. I will say the teams have been very supportive. Realistically, the teams have expressed -- some of the teams have expressed an interest in investing in the business.
So I think, if anything's, that's certainly and probably a strong indication as you can look for in the future in the business. The teams have done very well. The payments to the teams have increased significantly. We think there's real growth in the business and we think everybody should benefit from that growth.
And we are all partners in the business, and certainly Formula One and the teams should all benefit as we continue to build and grow the business going forward.
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Greg Maffei, Liberty Media Corporation - President and CEO [11]
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Yes, I think Chase is entirely right. Our interests are highly aligned with the teams, and there's every indication and reason to believe they are only going to be highly supportive of all the things we want to do.
As far as the dilution, we are going to pay $1.1 billion of cash and we are going to issue that what effectively on a fully diluted basis is going to be $3.3 billion of stock, with the combination of the note when it converts and the shares that we are issuing today.
Now, we are going to undertake potentially to sell some of that stock to generate liquidity for the CVC Group, but we are not going to change the amount of cash that we pay. That's only a question of whether the stock gets placed with CVC initially or gets placed with third parties, including potentially the teams, as Chase indicated.
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Ben Swinburne, Morgan Stanley - Analyst [12]
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I got you. Okay, thank you.
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Operator [13]
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Jeff Wlodarczak, Pivotal Research.
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Jeff Wlodarczak, Pivotal Research - Analyst [14]
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Congratulations. As part of this deal, do you have any arrangement with the leading racing teams to expand the number of races from the current 21 to what I think is this contractual limit of 25?
And then while you are going to have post this deal voting control, are there any lock-up arrangements with CVC and the other shareholders around selling the shares?
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Greg Maffei, Liberty Media Corporation - President and CEO [15]
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So, Chase, do you want to comment first on the --?
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Chase Carey, Formula One - Chairman [16]
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Yes. First, there's not an agreement. As I touched on looking at -- I guess in the first question -- there's interest in this sport around the world. And I think we want to continue to intelligently try and explore the opportunities to continue to grow it, and we will work with the teams. We will do it together. And we do think there are opportunities to continue to -- to enhance the race calendar, I guess as we talked about, but we do it together with all our key partners.
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Greg Maffei, Liberty Media Corporation - President and CEO [17]
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And as I think Chase indicated earlier and I mentioned, the teams are highly incented to the degree we grow races, grow revenue, grow profits, they are enormous beneficiaries.
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Chase Carey, Formula One - Chairman [18]
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Yes. They are not just partners in spirit, they are partners financially. They share in the revenues we generate.
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Greg Maffei, Liberty Media Corporation - President and CEO [19]
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So they are highly incented to work together.
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Chase Carey, Formula One - Chairman [20]
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Yes.
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Greg Maffei, Liberty Media Corporation - President and CEO [21]
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And the second part of your question was -- remind me, sorry.
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Jeff Wlodarczak, Pivotal Research - Analyst [22]
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Basically, the other non-Liberty shareholders are going to own 65% CVC. Are there any lock-up arrangements for CVC around when they are able to sell those shares?
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Greg Maffei, Liberty Media Corporation - President and CEO [23]
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We have an agreement in principle to work to distribute those in an orderly fashion, and I think it's in everybody's interest to make sure those shares are released in good fashion. And them owning 65%, they are more motivated than anybody.
And realistically, given that these firms have lives on their funds and the like, they are the ones who care in the short and intermediate term about the stock price, even more than perhaps we care.
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Jeff Wlodarczak, Pivotal Research - Analyst [24]
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Fair enough. Thank you.
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Operator [25]
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Amy Yong, Macquarie.
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Amy Yong, Macquarie - Analyst [26]
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Thanks. Chase, as previous CEO of DIRECTV, I was wondering if you could talk about some of your thoughts around the digital opportunity and how you are going to grow that without hurting the linear distribution? Are you thinking more about streaming or an app?
And I guess specifically in the US, it seems like NBC, that particular agreement comes up for renewal at the end of this year, or I think next year. How are you positioning Formula One in the US? Thanks.
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Chase Carey, Formula One - Chairman [27]
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First, there are multiple dimensions to developing the digital opportunities around Formula One. There's certainly the marketing potential, telling the Formula One story. Again, it's a great story. You've got some of the most attractive stars in the world and the drivers; great teams, great brands, great technology.
Taking advantage of that and making it accessible, telling -- really exciting that fan base, that's a part of it. Using the data capabilities of digital media to figure out how you improve and continue to grow the sport. And then certainly the direct-revenue opportunities, and I think we will continue to sort of evaluate those opportunities.
I don't want to get into specific plans at this point, but there's no question the digital platforms are becoming essentially a part of the larger video marketplace. And whether it's DIRECTV or Fox, that's been clear around the world, not just in the US. It's creating new competition for these rights. It's creating new opportunities to exploit these rights in different ways that take advantage of what each of the platforms have to offer.
We think we can find ways to work with our historical partners and these new digital platforms to create something that's good for everybody, and that's our goal. And we think that is really an opportunity that for Formula One with its global reach, its highly attractive fan base, is really a unique opportunity for us to develop something really special for Formula One. And it's sport and footage that you could take around the world, that really has appeal in every market.
So it is certainly going to be a big and important part of it, but we will do it, again, working with our existing partners in a way that works for everybody.
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Greg Maffei, Liberty Media Corporation - President and CEO [28]
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I think Chase has got it entirely right, but if I could just emphasize or add; few sports properties where you have as much footage, as much data flows, and a fan group which is intensely interested in all of that material that is frankly beyond probably the capabilities you can show on linear television, and we can find ways to exploit that to the benefit of everybody.
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Chase Carey, Formula One - Chairman [29]
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Yes. I think it's good for everybody. It's not necessarily win-lose. I think it can be a win-win proposition for everybody.
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Greg Maffei, Liberty Media Corporation - President and CEO [30]
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Thanks, Amy.
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Operator [31]
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Barton Crockett, FBR Capital Markets.
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Barton Crockett, FBR Capital Markets - Analyst [32]
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Thanks for taking the questions. I was wondering first about the structure, the tracking stock structure. You've got three tracking stocks at Liberty Media with three very (technical difficulty) businesses. Is there any reason for those to remain together as tracking stocks within Liberty Media, or should we assume that the road over time is for these to separate out and become regular stocks?
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Greg Maffei, Liberty Media Corporation - President and CEO [33]
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Barton, we have obviously no plans or intent to do any of that, but our history over time along the way have been to spin off businesses when they are mature or they are things that we think that would be better as an asset-backed security and trading on their own. As a practical matter, we probably have limitations on how many that we could do today, just having an insufficient number of ATBs.
But we will always be evaluating that and looking at what we can add in the interim versus how they would trade and where they would eventually be as freestanding businesses and asset-backed securities.
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Barton Crockett, FBR Capital Markets - Analyst [34]
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Okay. I mean, if you held onto your Formula One for three years, it would become an ATB then, wouldn't it?
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Greg Maffei, Liberty Media Corporation - President and CEO [35]
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I think it would be five.
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Barton Crockett, FBR Capital Markets - Analyst [36]
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Okay. All right.
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Greg Maffei, Liberty Media Corporation - President and CEO [37]
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Beyond the length of (multiple speakers).
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Barton Crockett, FBR Capital Markets - Analyst [38]
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On the sport, since we've had less experience with this year and you are putting a fair amount of debt on it, how would you describe the economic sensitivity to this if we grow through recessionary cycles? How sensitive is the revenue stream to that?
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Greg Maffei, Liberty Media Corporation - President and CEO [39]
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Well, a couple of points is -- I think first is an enormous percentage of the amounts are contracted. Secondly, if you look how the business has performed in other down cycles, it has really not seen a bump.
Third, the high free cash flow conversion that is going to allow us to pay down debt very quickly if that's what we choose to do, or maintain the leverage if that's what we choose to do. And we will evaluate that judiciously.
And lastly, because of the variable nature that so much of our expense is really payments to the teams under the Concorde Agreement, they profit when we succeed and they bear some of the downside when we are not as successful. I think it's actually a pretty stable business model, and we are confident that it can maintain leverage levels which on the surface may look high.
But when you look at the elements of the business, when you look at the high free cash flow conversion, when you look at the contracted nature of the revenue, I think it mitigates a lot of that risk.
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Barton Crockett, FBR Capital Markets - Analyst [40]
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That's great. Thank you for that perspective.
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Operator [41]
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Bryan Kraft, Deutsche Bank.
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Bryan Kraft, Deutsche Bank - Analyst [42]
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Hi, thanks for taking the question. I was just wondering if you could give some historical perspective on why there doesn't look like there was very much growth in revenue or EBITDA since 2013, in contrast to what sounds like some pretty interesting growth prospects going forward? And I guess this could be part of the answer to the question, but are the historical figures on slide 19 converted to US dollars at a constant exchange rate, or is that the actual exchange rate? Thank you.
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Greg Maffei, Liberty Media Corporation - President and CEO [43]
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That's the actual exchange rate looking at the numbers there. And I think some perspective is, is revenues have increased pretty nicely, partly driven by some increase in the number of races but also increases in broadcast revenues, increases in advertising and sponsorship, increases in fees paid per venue, per event.
But at the same time, not only did some of the renegotiations of the Concorde Agreement and some bonus payments that were made to certain teams, less of that profitability fell to the bottom line; less of that increase in the revenue fell to the bottom line.
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Bryan Kraft, Deutsche Bank - Analyst [44]
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Got it. Okay, thank you.
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Greg Maffei, Liberty Media Corporation - President and CEO [45]
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But we think that's absorbed. We've gone through that cycle and we remain confident that certainly through 2020 and the next Concorde negotiation, we don't have an unusual bump and there will be a much more linear relationship on the increases between revenue and the cost side, and actually an increasing and growing EBITDA margin.
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Chase Carey, Formula One - Chairman [46]
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We will get a better share of the revenue growth.
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Greg Maffei, Liberty Media Corporation - President and CEO [47]
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Yes, exactly.
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Bryan Kraft, Deutsche Bank - Analyst [48]
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Great. Actually, and I don't know if it's too early to ask this question, but how would you anticipate handling the currency risk once you own it? Do you anticipate engaging in hedging to hedge that currency, or will you just kind of let (multiple speakers)?
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Greg Maffei, Liberty Media Corporation - President and CEO [49]
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We haven't spent a lot of time on that, Bryan. We haven't spent a lot of time on that, but I will point out a couple things. The vast majority of our contracts are dollar-based. Obviously, we are going to be a dollar-functional currency company.
We do have some UK revenue, pounds-based revenue, but we also have pounds-based expense; not only the expense of running the headquarters here, the expense of the production facilities which are primarily in the UK. So we are really not that exposed. We do have some exposure that moves around, but it's a relatively hedged business against the dollar.
Chase, do you want to add anything?
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Chase Carey, Formula One - Chairman [50]
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No, I think that's right. I think an awful lot of the revenue are contractual revenues. Most of the contracts, the majority of the contracts are contracted in dollars.
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Bryan Kraft, Deutsche Bank - Analyst [51]
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Okay, great. Welcome back, Chase.
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Chase Carey, Formula One - Chairman [52]
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Thank you.
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Operator [53]
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Jason Bazinet, Citi.
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Jason Bazinet, Citi - Analyst [54]
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I just had two quick questions. First, can you talk about what financial disclosures the Street will get today post-step one and then after step two? Then second, I may be incorrect, but I thought there were some mutual funds like Waddell that essentially paid much higher equity values for stakes than the equity value you are paying.
So can you talk a little bit about what changed in the business that would cause the equity value to decline as much as it seems to have been with the low purchase price you guys are paying? Thanks.
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Greg Maffei, Liberty Media Corporation - President and CEO [55]
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Addressing the second part first, it's a little misleading. There were some dividends paid. There have been -- we obviously think we cut an attractive deal or we wouldn't have cut it. And I would point out there were various discussions in various times and rumors, speculation, that this business would go public at much higher numbers.
We think there's a lot of upside in the way we structured this deal, both for the benefit of Liberty shareholders but also the CVC Group; not only with the structure that we have on leverage, the upside of where the business is, the new management, but just the general part of being part of the Liberty Group.
So I think that's all fairly attractively placed. And again, it's a little hard to look at what Waddell paid and somebody else paid because of dividends that were paid along the way.
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Jason Bazinet, Citi - Analyst [56]
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Okay. And then regarding the financial disclosures that we will get post-step one?
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Greg Maffei, Liberty Media Corporation - President and CEO [57]
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Jason, we've given you all this. Read that appendix. You want more? What can I do? I'm not sure exactly what you are looking for, but we will obviously be trying to provide as much information as we can that is beneficial to our investors without compromising the confidential nature of some of our contracts; for example, what is paid on venues, what is paid by advertising and the like.
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Jason Bazinet, Citi - Analyst [58]
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No, no, no, I didn't mean that.
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Greg Maffei, Liberty Media Corporation - President and CEO [59]
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Tell me what you want, Jason. We will obviously trying to accommodate.
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Jason Bazinet, Citi - Analyst [60]
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I'm just saying between now and the completion of step two when you report financials, will we be getting quarterly financials? Or is that something that happens after step two?
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Greg Maffei, Liberty Media Corporation - President and CEO [61]
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Well, along the way we are obviously not going to -- we are an equity holder; we are not going to consolidate this business. So you are going to have limited visibility.
I think at our Investor Day, you should expect we will probably flesh out more of how we are doing just to give you an update on November 10. But we are not planning to file -- hold on one second.
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Jason Bazinet, Citi - Analyst [62]
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And that's true after step two as well?
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Greg Maffei, Liberty Media Corporation - President and CEO [63]
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It's been pointed out to me correctly that there will be a proxy which will have an update on some of this, and that proxy will be -- as I noted earlier, this deal requires a shareholder vote, not only to change the name but to issue the stock, the Liberty Media Group tracking stock to pay to the CVC Group.
So those will require a vote and in that vote, that proxy, we will surely have an update through that time.
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Jason Bazinet, Citi - Analyst [64]
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Okay. Thank you.
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Operator [65]
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Matthew Harrigan, Wunderlich.
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Matthew Harrigan, Wunderlich - Analyst [66]
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Thank you. This transaction looks really interesting just on the basis of better marketing, new geographies, an interest in consumer streaming and all that. But I'm actually out at Super Mobility and a lot of people are really drinking the Kool-Aid and justifying the 5G deployments on VR, Oculus Rift and Morpheus and things like that, and this clearly -- the sport is in the sweet spot for that and things like (inaudible).
And it looks like it's probably pre-optionality and I assume it's probably, I don't know, three, five, seven years out. But could you talk a little bit about that? I think you kind of alluded to it a little bit at the margin in some of your earlier comments. Thank you.
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Greg Maffei, Liberty Media Corporation - President and CEO [67]
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Well, I will start off if you don't mind, Chase. We believe a global content business with portable content that can be shared across so many countries and venues has enormous appeal. And the one that we have that has been very successfully exploited in many markets but honestly somewhat underexploited on a digital.
And the emerging technologies you are talking about will only further accelerate that. As you rightly point out, you could imagine an augmented reality or virtual reality experience as if you were in the car on a digital -- a digital run. All of those are just upside. Have we factored any of that into our business thinking? Modestly at best.
Chase, maybe you want to comment more fulsomely?
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Chase Carey, Formula One - Chairman [68]
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No. I mean, I guess I would just second what you talked about. I think this sport in many ways is so ideally suited to any of these emerging technologies, whether it's in the gaming arena or virtual reality arena.
As Greg said, racing Lewis Hamilton, this sport -- the technology around this sport is second to none, and the interest in the capabilities of these cars is incredible. And I think as we take advantage of that and develop all the extensions of it in all these ancillary businesses, again, it's not going to drive the business in the short-term. But I think they all will become an important part of the long-term growth of the business.
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Greg Maffei, Liberty Media Corporation - President and CEO [69]
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Yes, and if I could add one more thing. One of the things that as we've gotten to know the business -- I've gotten to know the business better, and I certainly didn't know it at all when we started this process. But it's been a long enough process, I've learned a little bit along the way.
How much technology goes into these cars, how much that aligns with the group of aficionados who would appreciate a digital experience, there is a high symbiotic nature of that. And I don't think the average American understands how much technology and how much that brand, how much that stands not only for luxury, a cool racing experience, but for the technology development. And I think there's a lot that can be done to exploit that's naturally synergistic with that.
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Matthew Harrigan, Wunderlich - Analyst [70]
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I'm glad you took August off, Greg. Thanks.
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Operator [71]
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James Ratcliffe, Buckingham.
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James Ratcliffe, Buckingham - Analyst [72]
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Just had two quick follow-up ones. First of all, are there any break fees associated with the deal if the antitrust approval in particular doesn't come through?
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Greg Maffei, Liberty Media Corporation - President and CEO [73]
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No. Fortunately, CVC didn't think of that. So, no, we don't have any break fees.
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James Ratcliffe, Buckingham - Analyst [74]
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Okay, fair enough. And secondly, how does Live Nation fit in?
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Greg Maffei, Liberty Media Corporation - President and CEO [75]
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Obviously, just to be clear, I think the reason why that really wasn't an issue is not only are we going to be shareholders in this -- we are shareholders in this now. We closed on step one, so we are highly aligned.
But I think all of us believe that the regulatory hurdles here, while they need to be negotiated, are ones that can be cleared and are comfortable with how this will turn out when the second complete closing will occur.
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James Ratcliffe, Buckingham - Analyst [76]
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Got it. And just secondly, how does Live Nation fit into the equation here? It's the other asset in what's going to be the Formula One Group. Does it make sense to have those two combined, or does it maybe end up somewhere else other than Liberty Media Corp? Thanks.
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Chase Carey, Formula One - Chairman [77]
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It's really about building, first and foremost, the live experience at these races. These races are tremendous events, in many ways one of the biggest events to occur in a city and a country in which they occur. And I think there's an enormous opportunity to make that event much bigger, much broader; appeal to a much larger audience; have things throughout the week; have related things; have other entertainment things.
In many ways sports is -- sports is entertainment, and events are entertainment. And unique events have clearly become more important, more special in standing out in a cluttered world. And I think there's an enormous opportunity for us to really make these events something much bigger than they are today.
Look, they are great today, but I think we could take them to another level by adding all sorts of dimensions that are related to the sport and just related to entertaining people, exciting people, and energizing people to everybody's benefit.
And clearly, Live Nation is in that business, so -- they are in the business of creating events that I think are all part of a great experience. If you have a great weekend in a big city, they are part of making that weekend something special.
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Greg Maffei, Liberty Media Corporation - President and CEO [78]
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Yes. I think I agree with Chase. There's upside in that. We will see how that develops. Obviously, Live Nation has got to run its business to its best benefit, and Formula One certainly will as well. But we hope there's some ways they might be able to work together, and we think they could be highly synergistic.
I think with that, operator, we are going to call it a night. Thank you very much to all for your interest, continued interest in Liberty Media, and I hope we see many of you on November 10 for our Investor Day in New York.
The next race, for those who are interested, is in Singapore in nine days. Thank you very much.
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Chase Carey, Formula One - Chairman [79]
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Thanks a lot.
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