Ecclestone loses grip on Formula One as banks take control

A consortium of three investment banks has finally succeeded in wresting control of the commercial rights to Formula One from Bernie Ecclestone, the motor racing supremo, who has dominated the sport for the past 30 years.

A consortium of three investment banks has finally succeeded in wresting control of the commercial rights to Formula One from Bernie Ecclestone, the motor racing supremo, who has dominated the sport for the past 30 years.

Bayerische Landesbank (BayernLB), one of the three banks involved, broke the silence yesterday surrounding a settlement of the long-running dispute between the banks and Mr Ecclestone, which was agreed on Wednesday.

The German bank, JP Morgan and Lehman Brothers together own 75 per cent of the Formula One holding company SLEC. They had been due to clash with Mr Ecclestone in court in May to try to gain voting control of SLEC's operating subsidiaries such as Formula One Administration (FOA).

Although the banks are the majority shareholder in the ultimate parent company, Mr Ecclestone structured the group so that he maintained control.

The parties reached a settlement on Wednesday, although the terms of the deal were not disclosed. But in a statement yesterday, BayernLB revealed that Mr Ecclestone had agreed to allow the banks to have both board representation and voting rights within the subsidiaries commensurate with their shareholding.

The three banks have set up a separate company - Speed - to hold their combined 75 per cent stake in SLEC. Mr Ecclestone and his family trust, Bambino Holdings, own the remaining 25 per cent of the company.

The Bayern LB statement said: "BayernLB, as the majority shareholder of Speed Investments, welcomes the fact that Mr Ecclestone and Bambino Holdings have demonstrated prudence in backing down on all of the points under legal dispute in terms of content. As a result, the lawsuit has been resolved two months before the appointed court date."

Dr Gerhard Gibrowsky, a board member of BayernLB and the banks' sole representative on the FOA board, added: "This new development has helped Speed, as the majority shareholder of SLEC, to regain influence commensurate to its ownership. Speed will also exert this influential role at the operational level in a constructive and responsible manner in the interest of all of the parties involved."

Mr Ecclestone could not be reached for comment yesterday.

The settlement brings to an end a three-year legal battle between the two sides, during which the 74-year old Mr Ecclestone fought vociferously to maintain autonomous control of Formula One.

In spite of the banks' controlling stake in FOA's ultimate parent company, they were granted just one place on the board. The other two members were Mr Ecclestone and his legal adviser, Stephen Mullens.

In December, the banks won a preliminary victory, giving them control of Formula One Holdings (FOH), the direct parent company of FOA. Mr Ecclestone then immediately resigned from the board of FOH. However, he was quoted at the time as saying that the ruling "changes nothing at all".

Although the banks do not want to lose Mr Ecclestone as the head of Formula One, the consortium said it was not prepared to carry on without any control over its stake.

The case between the two sides had been due to start at the High Court in London on 10 May.

The banks ended up with their stake in Formula One after they lent Kirch, the German media group, $1.6bn (£856m) to buy the 75 per cent holding more than three years ago. When Kirch went bust, control of the holding passed to the banks.

While the banks have been keen to sell their stake, and have had several discussions with Mr Ecclestone, they say the right price was never forthcoming.

With the dispute now behind them, the sides are under pressure to come up with a plan to fight off the threat of a rival Formula One championship - run by BMW, DaimlerChrysler, Fiat and Renault - to be launched in 2008 when Mr Ecclestone's current licence expires.