German TV mammoth Kirch Group, a key investor in beleaguered EM.TV which yesterday announced a DM2.8 billion loss [WAMN: 01-May-01], is poised to gain indirect control of Formula One, the company controlling world motor racing.

The veiled deal – allegedly worth nearly $1bn – is part of a debt for equity swap between Kirch and EM.TV. It will lift the former’s stake in Speed Holding, a shell company that controls 75% of the equity in Formula One, from 49% to 67%.

The remaining 25% in Speed is held by UK wheeler-dealer Bernie Ecclestone, who also owns with Speed a company called SLEC which recently acquired a 100-years exclusive broadcasting rights deal for £250 million.

Ecclestone will be less than overjoyed at the transfer of control to Kirch. Neither will carmakers, ranging from the major auto groups to specialist racing concerns – all of whom have expressed their opposition to the power wielded by the German broadcaster. At stake is the sport’s current free-to-view status which would go out of the window if Kirch decides to offer F1 events to pay-to-view broadcasters.

The situation is almost as volatile as the fuel that powers F1 cars and could change at any time. Kirch could if its wishes offer car manufacturers a significant stake in Speed, with the option to increase their holding in coming years – a likely scenario, according to analysts.

Another option has been aired by German carmaker BMW, whose spoke declined to comment on the latest developments. He did, however, warn that the formation of a rival racing circuit funded by the carmakers themselves remains on the cards.

News source: Handelsblatt (Germany)