NASCAR’s Takeover of ISC Another Step in Expected “Global Motorsports Roll-Up”

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NASCAR’s proposed $2 billion takeover of International Speedway Corp. (ISChas been framed by many as the racing circuit’s solution to cutting down on a marathon 38-race season schedule. The theory is that private ownership of 13 tracks (ISC’s 12 + Iowa Speedway) gives the racing circuit the flexibility needed to eliminate and/or move race dates and venues. But Chris Lencheski (a sports/media private equity CEO, a winning NASCAR team owner & LeMans racing promoter in D.C.) believes that there’s a larger play at “value creation” at stake here – “the chance to own the entirety of global motorsports for the first time, should someone be so motivated.”

Howie Long-Short: Mark Coughlin suggested back in late April that Sonic Financial Corp’s bid to take Speedway Motorsports, Inc. (TRK) private was the “first step” to a NASCAR roll-up, but Lencheski points out that it was actually the second step to this “global motorsports roll-up opportunity.” NASCAR’s April ’18 acquisition of Automobile Racing Club of America (ARCA) – stock car racing’s minor leagues – eliminated a potential competitor (in the late 90s/early 00s Bruton Smith expressed genuine interest in acquiring ARCA to compete with NASCAR) and started the chain of events.

Hulman & Company’s recent sale of their consumer packaged goods brand, Clabber Girl, falls nicely in line should a buyer seek a global roll-up. Mark Miles’ decision to unload a company best known for its baking powder gives the CEO “optionality” – a prospective buyer of a pro sports organization and its venues isn’t going to want to be in the baking goods support business – and with “the world’s most famous race track (Indianapolis Motor Speedway), the single biggest event in the world on a given day (Indianapolis 500) and a series (IndyCar) with some positive momentum for the first time in 15 years there shouldn’t be a lack of interest in the opportunity.”

Lencheski and others expect that NASCAR may look to buy the sport’s other main track operator – Speedway Motorsports Corp (TRK) – or conversely, TRK may wish to sell to them out concern that they’ll be locked out of the “market effect”. The 12 ISC tracks that the France family is acquiring host 21 of 36 Monster Energy Cup Series races. A subsequent acquisition of TRK would “effectively give NASCAR every track (Pocono, Dover & Indianapolis – minus a sell – would be the exceptions) and bring 98% of all NASCAR related revenue streams under one roof”, making for an attractive asset for a single-entity buyer. Acquiring TRK‘s 8 tracks would also enable NASCAR to command the highest multiple when selling the rolled-up assets.

Liberty Media Corp. (already owns Formula One) and Fenway Sports Group (think: Red Sox, Liverpool F.C.) are the most logical buyers for a NASCAR roll-up and the remainder of the Hulman & Co. portfolio. Aside from their deep understanding of entertainment, sanctioning bodies, ticket sales, media sales and licensing sales, both operate with “global business models” – and that’s critical because it’s where the opportunity lies (NASCAR and IndyCar both have larger international aspirations and F1 could use the ISC/TRK tracks to increase North American awareness).

Liberty is also motivated to take down as many qualified global sports properties that it can “level up” with their existing portfolio. As Lencheski pointed out, between stakes in “Live Nation, Trip Advisor, Expedia, QVC etc. the opportunity to increase their pipeline with global events to sell tickets, rental cars, flights, hotel rooms and merchandise is attractive; and that’s before the ‘new normal’ digital media ecosystem cuts across continents, which will increase economic opportunities for those that can create value from synergy and expense-side redundancies.

As for Fenway Sports Group, they’re “invested in a NASCAR team, have access to capital and [John Henry] has expressed interest in buying NASCAR.” It’s certainly feasible Fenway would align with Liberty on what would be the only independent world-wide entertainment asset as large as the World Cup or Olympics; yet, it would be held on an annual basis.

Fan Marino: The reason that Lencheski believes the talk surrounding schedule changes is “nothing but noise” is because “there’s no way NASCAR is going to buy these companies, merge them together and then not keep the existing schedule essentially intact.” There will be some changes – and there should be based on the product – but NASCAR doesn’t need to complete a merger to alter its schedule. Existing contractual agreements with the tracks expire at the end of the 2020 season.

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NASCAR Hires Goldman Sachs to Explore Sale

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The France family, majority owners of NASCAR, has hired Goldman Sachs Group to “identify a potential deal for the company”, including the sanctioning body. An aging fan base (58, only golf, tennis and horse racing older), depressed race-day attendance (ISCA reported -1.6% YoY decline in ‘17), steadily declining TV ratings (9/10 races this season have fallen to all-time or decade-plus lows) and minimal “star-power” (see: Dale Jr. retirement) have raised concerns about sport’s long-term viability, which may explain why the France family is looking to sell after 70 years. No valuation has been established for NASCAR, though the company is expected to fetch several billion dollars; for reference purposes, Liberty Media Corp. acquired Formula One (FWONA) for $8 billion+ (included assumed debt, though no tracks were included) in Jan. ‘17. Sources have cautioned that talks remain in the exploratory stage and that no deal is imminent.

Howie Long-Short: NASCAR television ratings are down from their mid-2000 heyday, but it’s important to consider that the sport continues to put up impressive viewership numbers on Sunday afternoons. The spring race at Talladega last week saw TV viewership decline 20% YoY and it still drew 4.7 million viewers. It also must be noted that NASCAR has finished as the No. 1 or No. 2 sport (in terms of consumption) during 8 of the first 10 weekends of the ’18 season.

The France family is reportedly looking to sell a “majority stake” in the company. In addition to the Cup Series, NASCAR operates the Xfinity Series (2nd tier), Camping World Truck Series (3rd tier) and recently acquired ARCA (low-level stock car racing, will take over operations in ’20). The family also controls roughly 1/3 International Speedway Corporation (ISCA) shares. ISCA owns and operates 12/23 NASCAR Series tracks, which host 19 of 36 races on the MENCS schedule; including the Daytona 500. Sports Business Journal indicated that NASCAR executives expect the company (with tracks included), to draw offers between $3-5 billion.

I asked Dan Cohen, Octagon SVP, Global Media Rights Consulting Division who he thought might be interested in acquiring the stock car racing circuit?

Dan: Media companies looking at locking in live sports rights and programming around a well-established brand. Comcast, Disney, Liberty, ATT/Turner and Discovery are all possibilities. Also, complimentary auto racing businesses (think: Hulman/Indycar, TPG/IHRA) that would see consolidation as a strategic and immediate means of growing enterprise value.

Fan Marino: Those who say NASCAR needs a new “face of the sport” (to take over for Dale Jr.), should consider Kevin Harvick. Harvick won a rain-interrupted race at Dover on Sunday, his 4th checkered flag of the season (11 races, 8 Top 5 finishes). He led 201 of the 400 laps at the Monster Mile, taking a lead he would not relinquish with 62 laps to go. The win was the 41st of Harvick’s career, placing him 18th all-time. Only Kyle Busch (46) and Jimmie Johnson (83) have more amongst active drivers. Check out what Harvick did for his fans, before the race; there is no better ambassador within the sport.

Looking for a fresh face? There are several to choose from. 7 of the Top 15 best-selling drivers at retail (i.e. the track) are under the age of 30 and sales of their merchandise is up 74% YoY.

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