CVC’s free Formula One hospitality

Formula One has handed thousands of free hospitality passes, worth an equivalent of $5.4m, to the private equity fund which controls the sport according to an article in the Sunday Telegraph by Christian Sylt.

It is known as Fund IV and it is managed by CVC Capital which bought F1 in a leveraged buyout in 2005. It used $965.6m from Fund IV and $1.1bn of debt from the Royal Bank of Scotland. In March the following year F1 paid an estimated $400m for Swiss company Allsport which operates the corporate hospitality at all but three of the 19 races.

F1's hospitality area is a tented structure which is known as The Paddock Club and is adorned with fresh flowers and turf flown in from England. It attracts some of the world's wealthiest high rollers with previous guests including Michael Douglas, Brad Pitt, film-maker George Lucas and Mexican billionaire Carlos Slim.

Tickets cost up to £3,740 each but CVC's funds get a free table and meals for 10 people at each of the 16 races where Allsport arranges the hospitality. The deal was arranged when Allsport was acquired and it is still in place even though CVC has since sold around half of its F1 shares giving it around 35% of the business.

The details of the deal are buried in the 498-page prospectus for the stalled flotation of F1 which was planned to take place in 2012. It states that "in 2006, in connection with the acquisition of Allsport Management S.A by our Group, Allsport agreed to provide certain arrangements at each Event at which Allsport operates the Paddock Club to the CVC Funds, who were the majority controlling shareholders of the Group at that time… Under the current Paddock Club Arrangements, Allsport shall provide to the CVC Funds (i) a table and meals for ten people (at no cost to the CVC Funds) and (ii) a table and meals for up to an additional ten people at cost price plus 5%."