Supercars value falls $200m after sale confirms big hit taken by private equity outfit Archer Capital

The motorsport series will have new owners, who will have a big job returning it to the profits it was enjoying a decade ago.

Profits for the Supercars motor racing series have been falling as the sport takes a Covid hit.

Private equity outfit Archer Capital has taken the bulk of a $200m hit on the Supercars motor racing series, with a new ownership group set to take control in a deal representing less than one-third of its previous sale value.

In a transaction set to be announced as soon as Friday, Supercars will be sold in a $100.3m deal to The Australian Racing Group consortium and the TGI Sport consortium, which have joined forces to form one proposal after earlier competing against each other. About $57m of the deal will go to Archer, which paid about $180m to take a 60 per cent stake in Supercars in 2011 that valued the series at about $305m.

The remaining $35m will flow to the team owners over the next few years, as part of their racing entitlement contracts (RECs).

The deal was previously foreshadowed by The Australian’s DataRoom column. Sale documents obtained by The Australian show that the new owners are buying a business that has also suffered a similar hit in profit over the past decade.

Under previous majority owners Sport & Entertainment Limited, Supercars achieved earnings before interest, tax, depreciation and amortisation of about $32m-$34m.

Documents seen by The Australian show that Supercars recorded “EBITDA before appearance and grid fees” of $23.8m from $118m revenue in 2019, the last completed year of racing that was not interrupted by Covid-19.

Those figures dropped to ­EBITDA before appearance and grid fees (which would run into the millions of dollars annually) of $18.5m from revenue of $55m in 2020 and then a projected $22.1m from $93.1m in the current 2021 year.

The most lucrative race on the Supercars calendar each year is the Bathurst 1000 event, which this year has been delayed until the first weekend of December due to Covid-19 and will take place after four races at Sydney’s Eastern Creek from late this month and through most of November.

Various scenarios regarding future profit when a more consistent season can run are also included in the document, ranging from $110m revenue and EBIT of $24.4m in a 13-race season through to a 15-race championship that would generate $124.1m revenue and EBIT of $32.2m.

The sale documents claims ­future growth will be generated by “improving awareness around event schedule” and “additional government supported events” in Australia and New Zealand.

Supercars’ new owners also believe they can tap into digital viewer demand for the racing ­series via a “digital transformation to broaden viewership reach and expand content offering”, and also negotiate more ­lucrative broadcast and streaming services deals while enhancing “Supercars non-racing content via reality programs, documentaries and e-series”.

The new owners were also undertaking a $25m capital raising led by advisory firm Henslow, with investors taking a large slice of the raising offered board seats and personalised VIP experiences at selected Supercars events.

Ordinary shareholders would be entitled to participate in dividends up to the first $2.5m of free cashflow. The overall structure would also include $35m of third-party debt.

A category of “value-add” shareholders would provide $6m in services such as billboards, radio promotion and industry ­expertise for two years before gaining ordinary shares.

Business and sporting identities that will be involved in the new ownership group include former QSM Media boss Barclay Nettlefold, respected former IMG Australia head Martin Jolly, TLA Australia chief executive Craig Kelly and champion racing driver turned commentator Mark Skaife.

Mr Kelly, a former Collingwood AFL premiership winner, has become one of the nation’s most powerful sports management figures, with his TLA involved in various commercial and promotional projects with ­almost every major Australian sporting competition.

Australian Racing Group is owned by Brian Boyd and John McMellan from Payce Property and Payce Security, along with well-known racing identities Garry and Barry ­Rogers.

The TGI Sport consortium also includes TLA Worldwide with funding from TGI’s US-based owner, Bruin Sports ­Capital.