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Wednesday, July 17, 2024

Oil fund admits to Formula One woes

Yngve Slyngstad, who leads the management of Norway’s huge sovereign wealth fund known as the Oil Fund, has admitted that the fund’s investment in the company owning rights to Formula One racing has stalled badly. The investment’s woes have been accelerated by a share issue that ran out of gas and, not least, corruption charges against the company’s boss, Bernie Ecclestone.

As head of Norway's sovereign wealth fund, also known as the oil fund, Yngve Slyngstad is considered the third most-powerful public sector investor. PHOTO: Berglund
As head of Norway’s sovereign wealth fund, also known as the Oil Fund, Yngve Slyngstad is a powerful public sector investor. Now he admits to trouble with the fund’s investment in a company tied to Formula One racing. PHOTO: Berglund

“We are of course not happy with the situation that has arisen,” Slyngstad told newspaper Dagens Næringsliv (DN) on Tuesday, in a rare admission of concerns related to a specific investment by the fund. “What’s especially unfortunate are the corruption charges. There’s no doubt about that.”

DN has been tracking the fate of the fund’s decision, backed by Slyngstad in 2012, to invest NOK 1.8 billion (USD 300 million) in Delta Topco, a firm based in the tax haven of Jersey that owns the Formula One Group. It is run by Ecclestone and responsible for the promotion of the FIA Formula One World Championship and its commercial rights. Delta Topco is in turn owned primarily by investment companies including CVC Capital Partners, which newspaper The Guardian describes as a private equity firm that controls motorsport.

Ecclestone is an 83-year-old former Formula One team boss who’s long been credited with transforming the sport into the multi-billion-dollar business it is today. He now faces, however, a German bribery trial sparked by a EUR 44 million payment that he and his family trust made to a former executive at German bank BayernLB who’d been responsible for selling the bank’s stake in Formula One to its current private equity owners. German prosecutors charge that the payment amounted to a bribe. The Guardian reported last week that Ecclestone was “safe for now,” though, after CVC Capital said he would not be removed from his position as chief executive of Formula One. Ecclestone also won a related civil lawsuit in the UK where he was accused of undervaluing Formula One through the alleged bribe because, according to The Guardian, other bidders may have paid more than CVC.

Oil Fund’s troubled involvement
DN has reported that Norway’s Oil Fund, ranked as one of the largest sovereign wealth funds in the world, got involved with Formula One two years ago, when it bought shares in Delta Topco and lent it NOK 1.1 billion. The Oil Fund, set up to secure long-term investment of Norway’s oil revenues for future generations’ pensions, is restricted from investing in shares that aren’t publicly traded, but the plan at the time was for the shares in Delta Topco to be listed in Singapore in the summer of 2012. That didn’t happen. DN reported that the stocklisting plan was suspended just nine days after the Oil Fund’s investment was made public, and now can’t proceed until the legal trouble surrounding Ecclestone is settled.

Difficulties have piled up since the Oil Fund invested in Delta Topco, climaxing in the bribery charges filed against Ecclestone. Slyngstad now finds himself and the fund in an uncomfortable position, holding its only unlisted shares in a company based in a tax haven and led by a man charged with corruption. Slyngstad told DN, though, that he remains confident the board of Delta Topco Ltd will “clean up” and that a stocklisting will ultimately proceed.

Repeating an often-heard claim
“We have made it crystal clear that we have zero tolerance for corruption,” Slyngstad told DN, repeating a claim often heard of late in Norway by chairmen and government regulators of companies also caught up in corruption cases, like Yara and Kongsberg Gruppen. “We have full confidence that the board will take control of all this,” Slyngstad added. “It’s clear that if it’s not handled in a correct manner, we won’t want to be owners anymore. We won’t keep sitting with these shares.”

He told DN that he still believes there’s a market for the Delta Topco shares, that they will be listed publicly and that the Oil Fund therefore remains within its mandate. “There is still a clear intention of conducting a stocklisting (of the shares in Delta Topco) just as soon as it can take place,” Slyngstad told DN. He wouldn’t put a price on the shares, though.

Accepting criticism
Slyngstad seemed willing to accept criticism for the Oil Fund’s Formula One investment in the first place. “We probably should have publicly commented on our relation to this company (Delta Topco Ltd) at an earlier stage,” Slyngstad said, adding that “we could have asked for an exception to the confidentiality agreements we signed.”

Slyngstad also admitted that “we should learn for the next time that signing comprehensive  agreements that we can’t say things, if a stocklisting actually doesn’t occur a few weeks later, can have a high cost.” In this case, Slyngstad candidly admitted, “vi bommet.” (literally, “we miscalculated.”) There can be no stocklisting, Slyngstad said, until a verdict is reached in the corruption case against Ecclestone.

While Slyngstad the Oil Fund has confidence in the Delta Topco/Formula One board, he is not happy that Ecclestone remains in place as chief executive and has only been removed from the board himself. “We wish he had been formally suspended (as chief executive), but he has been stripped of all his executive powers,” Slyngstad told DN. Berglund



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