BRDC explains proposals
The British Racing Drivers' Club (BRDC) has sent the following letter to its members, explaining its proposals for the redevelopment and running of Silverstone.
"Following our letter of 26 January 2006, we are writing as promised to give notice of an Extraordinary General Meeting of the BRDC to be held on Wednesday 22 February 2006 at the Jimmy Brown Centre at Silverstone at 1.30pm.
Background
As you know, since the departure of the Interpublic Group from Silverstone in 2004, your Board has been assessing the most appropriate way to safeguard the future both of the Club, and of Silverstone as the home of British motorsport and the British Grand Prix.
Options for the Future
For some time, we have debated the options available to meet these objectives including:
Maintaining the status quo
Voluntarily relinquishing the British Grand Prix
Redeveloping the Circuit using existing resources
Developing a Master Plan in house with a view to engaging external developers to implement it
Engaging a commercial partner to develop and operate the Circuit
Together with our advisers, the Board undertook an analysis of these options. The options and our conclusions were shared with the Regional Co-ordinators in the Autumn. We undertook to the Co-ordinators to give Members more information and an opportunity for a full debate before finalising any transaction.
The Board's Conclusions
The Board and its advisers came to the view that given the BRDC's nature as a private members' club with finite resources, the best option for the Club was to seek a commercial partner. Furthermore, a co-ordinated approach to the operation and development of the Circuit is regarded as the key to unlocking the full value of the Silverstone estate.
The rationale for this conclusion was as follows. The Board shares the view held by many Members that hosting the British Grand Prix at Silverstone is a key part of the Club's activities, enhances the Club's standing and is a significant element of the value of Silverstone. Whilst the SCL team has taken tremendous strides in improving the financial viability of our commercial operations at the Circuit, the inescapable reality is that present day Circuit operations, heavily dependent as they are on one high profile event, involve substantial commercial risk and extensive continuing capital expenditure (in the period from 1988 to 2000, the Club spent approximately £30 million on capital projects and the Interpublic Group spent around a further £25 million in four years). The Board's view is that maintaining the status quo is therefore not realistic in the longer term.
We are not a property development company and are not equipped with the financial and other resources to undertake a development of the size and complexity required.
Project Hill
As you know, late last year we appointed KPMG Corporate Finance to assist in identifying an appropriate partner or partners for the Club. With KPMG's assistance, we have undertaken a rigorous tender process. An information memorandum was sent to thirty interested parties and nine full written bids were received. Following extensive evaluation, including interviews of bidders, by Christmas 2005 we had identified a shortlist of three proposed development teams who most closely met our objectives. We are now delighted to tell you that following a period of negotiations we have reached agreement in principle with St Modwen Properties plc and Northern Racing plc, in which St Modwen has a substantial shareholding, as the preferred bidders to develop and operate the Estate.
The challenge faced by the Board and our advisers was to find a commercial partner with a proven track record of both large scale multi-use development and venue operation. The combination that St Modwen and Northern Racing offer closely matches our aspirations.
St Modwen is one of the UK's leading property companies and is a member of the FTSE 250. Its turnover for the six months to 31 May 2005 was £81 million. St Modwen's market capitalisation is approximately £558 million. St Modwen's stated strategy is to carry out town centre regeneration, partnering industry in restructuring, brownfield land renewal and heritage restoration. Its financial objective is to double the size of the company every five years. Recent major projects include Llanwern Steelworks and MG Rover's Longbridge site. Further information can be found on St Modwen's website at
www.stmodwen.co.uk.
Northern Racing is listed on the Alternative Investment Market. Its turnover for the 12 months to 31 December 2004 was approximately £30 million. Northern Racing's market capitalisation is approximately £50 million. Northern Racing operates nine horse racecourses throughout England. Although not involved in motorsport, your Board has been particularly impressed by Northern Racing's venue management and in particular its success in driving up attendance and profitability through a combination of operational efficiencies, strategic capital investment and marketing skills. We are confident that the combination of our existing first class business team at Silverstone with Northern Racing's management and capital resource will be a successful combination. Further information can be found on Northern Racing's website at
www.northernracing.co.uk .
Terms Agreed
The terms agreed with both parties are set out in Heads of Terms which are summarised in the enclosed "Transaction Summary".
The resulting transactions would:
Transfer the commercial responsibility for developing and operating Silverstone to St Modwen and Northern Racing
Appoint Northern Racing for an initial 25 year period as Circuit operator but include safeguards if it fails to meet agreed standards
Oblige Northern Racing to promote the British Grand Prix and to seek renewal of the Promoters Contract beyond 2009
Allow the BRDC to share in any profits generated from Circuit operations whilst insulating it from the commercial risk of those operations
Oblige Northern Racing to honour existing Members rights
Provide for the commercial development of the Silverstone estate by St Modwen in a manner that is consistent with Silverstone's primary role as the home of British motorsport
Commit St Modwen, at its cost, to work with the BRDC to develop a Master Plan for Silverstone
Enable the BRDC to call on St Modwen to spend up to an agreed sum on Circuit improvement works if, and only if, the BRDC decide they are needed
Enable the BRDC to receive full value for its land at Silverstone, as and when it is developed
Your Board is confident that these terms will unlock the full value of Silverstone, safeguard Members' rights and benefits and lay strong foundations for the Club's future.
The EGM
Any proposal to develop Silverstone, or to appoint a new Circuit operator, is a major step for our Club and the Board would not wish to proceed without the fully informed support of the Members. Accordingly, we have decided to convene an EGM now to seek your approval before committing the substantial management and other resource that would be required in negotiating and finalising binding agreements with our preferred bidders. We should emphasise that if we receive your support at this EGM for proceeding with the project, any binding agreement would still need your final approval at a further general meeting. Our intention would be, if possible, to seek this approval at our Annual General Meeting in April if the timetable with our proposed preferred bidders allows.
The key financial terms of the transactions are set out in the Transaction Summary. Copies of the full Heads of Terms, which we should stress are commercially confidential agreements, are available for review by you by prior appointment at the BRDC Farm at Silverstone from today until the EGM. For the convenience of those of you based in and around London, we have also arranged for copies to be available for review at the offices of our Solicitors, Baker & McKenzie at 100 New Bridge Street, London EC4V 6JA during normal business hours. Copies will also be available in the Jimmy Brown Centre on the morning of the EGM.
At the EGM, we will explain in full why the Board is convinced that the proposed transactions are in the best interests of the Club. They are the best way for us to safeguard motor racing in the UK and the future of the British Grand Prix and to maximise the value of the Silverstone Estate for our Members and our future.
You will see that the enclosed Notice of EGM sets out two proposed ordinary resolutions authorising the Board to continue with negotiations, one with St Modwen, the second with Northern Racing. Your Board is unanimously of the view that it is in the best interests of the Club to proceed with both transactions and that this approach will best achieve the Club's objectives.
You are strongly recommended to vote in favour of both resolutions at the EGM.
We look forward to seeing you at the EGM and to a full and lively debate. We would like as many Members as possible to attend in person, so that they can hear the Board and its professional team explain why they recommend the proposed transactions before voting. However, if you cannot attend, we would urge you to make your views known by voting by proxy. Please carefully read and follow the proxy voting instructions enclosed with this letter.
Yours sincerely
Stuart Rolt
Chairman
