Club Stakes
A controversial deal and the resultant membership backlash has broken friendships and split the British Racing Drivers’ Club.
The fate of the recently announced joint venture between Silverstone Group and TWR Group, to form Silverstone Motor Group, hangs in the balance. It is a very lop-sided balance at present, and a decidedly thin thread by which the situation is suspended. Quite possibly the greatest cause célèbre in recent British motorsport history could threaten the entire future of the British Racing Drivers’ Club and the Northamptonshire circuit itself. Friendships have been broken and opinions sharply divided in a ‘private’ disagreement that has spilled over into downright animosity, allegations of malpractice and more mudslinging than the House of Commons sees in a complete Parliamentary session.
Under the SMG deal, Silverstone Circuits paid £5.3M (made up of cash realised from selling £1.8M of Club assets and the rest in the form of a bank loan) to purchase a 5O% shareholding in TWR Group’s motor retailing franchises. Details of the deal were leaked just before the BRDC’s Annual General Meeting at the end of April, and some of the members became uneasy. At the meeting acrimony was rife and Silverstone Circuits Chairman Torn Walkinshaw, the architect of the deal and Chairman of TWR Group, was ousted as a BRDC Board member. Fellow BRDC Board members, President Jack Sears, Ed Nelson, David Piper, Barrie Williams and Mike Wheatley were all re-elected, while Arthur Gill, Dickie Attwood, Stuart Graham, Peter Jopp, Don Truman and John Watson remained as fellow directors. The Silverstone Circuits Board comprising Sears, Graham, Jopp, George Smith, Derek Clevely and Managing Director Hamish Brown met shortly afterwards to express its total support for its Chairman Walkinshaw.
“The anger there among some of us had to be seen to be believed,” said a BRDC member. “There were some very, very angry people about. Silverstone is now hocked up to the eyebrows in securing the deal and it doesn’t need the risk.”
Why was such a controversial deal mooted in the first place? Walkinshaw firmly believes that to fulfil its contractual obligations in running the British GP for the next five years, and to ensure that Silverstone is maintained to a sufficiently high standard that the contract may then be renewed in 1997, the circuit must make heavy investment. “Without that we won’t get the Grand Prix again, it’s as simple as that. We need to make massive investment.”
Others, such as Ken Tyrrell and Innes Ireland, are implacably opposed to such diversification, believing it to be totally outside the interests of the BRDC. The former has been instrumental not only in calling for and succeeding in holding an Extraordinary General Meeting, but also in canvassing members and lobbying them for support. The EGM was held late in June and considered two resolutions, one from each side. The first, proposed by the directors, sought to ratify the deal. The second, proposed by opposing members, demanded that the directors take ‘all lawful steps available’ to terminate it.
This was a war. In preparation for it both sides went to extraordinary lengths. The BRDC Board issued a lavish special bulletin outlining the reasons behind the transaction, and quoted Bernie Ecclestone’s comment from Monaco: “Silverstone is a famous old place with great traditions, like Monza. But it, like Britain, has no divine right to a Grand Prix. It is up to Tom Walkinshaw and Silverstone to do something about it themselves — they’ve got to keep their promise to continue developing the circuit.”
The cynics among us wondered about a little scene in Monaco where Bernie had apparently cut across Walkinshaw’s lunchtime conversation and demanded to know what he was doing about modifications to the circuit, so soon after a new deal had been agreed. Oddly enough, this was also the first time we had learned that the British GP was anything but firm in the long-term. It smacked of a bit of political stage management.
The bulletin outlined the need to invest in resurfacing the track, heavily upgrading the pits, the paddock area, television and radio commentary positions, the grandstands, spectator facilities, race control and administration, the timekeepers’ and stewards’ offices, office accommodation and the car parking facilities to allow for construction of the Silverstone bypass scheduled for 1995.
‘Recent development and upgrading of modern Grand Prix circuits such as Barcelona, Kyalami, Monza, Imola and Magny Cours serve to demonstrate the costly upgrades required for Silverstone’s facilities,’ it said. The total cost of these improvements was conservatively estimated at £15 million to £20 million.
Accompanying the bulletin was a 28-page document entitled ‘The Investment by Silverstone Circuits Limited in Silverstone Motor Group Limited’. It outlined in detail the Executive Summary of the transaction, together with financial information and the terms of the joint venture. According to financial analyst Rawlinson & Hunter of London, and subject to the usual reservations, Silverstone Motor Group could generate a profit of £5.3M by 1996, for an investment of similar amount (£3.3M for 500,000 A shares and £2M for two million Preference Shares). If SMG was successfully floated by 1996/97, it estimated its potential capital value in excess of £63M.
The Directors of the BRDC held four regional seminars so that members could put questions they had prior to the EGM. Meanwhile, the requisitionists also met to plan their tactics.
The defence committee chaired by Tyrrell and comprising Tommy Sopwith, John Fitzpatrick, Tom Barnard, Peter Gaydon, John Wagstaff, Martin Colvill, Frank Sytner, Dave Brodie, Bubbles Horsley and Michael MacDowell, summarised the situation in a letter circulated to members, commenting: ‘The distributorship subsidiaries acquired by SMG from TWR Group had losses in 1990 of £2.2M and in 1991 of £1.4M and in the first two months of this year of £103,000 .
‘BRDC has purchased for £5.3M a 50% share in a business having total net assets of £4.3M which is making a loss and has made a substantial loss for its last two accounting periods.
‘BRDC has to fund the interest on the £3M which it has borrowed. There is however a statement that no dividends will be paid by SMG in the initial years: the Joint Venture Agreement indicates until 1996. During this period BRDC will have to fund the interest on the loan with no matching income from its investment.
‘BRDC accepted the rental value (which in the first year comes to £979,489) placed on the leases by experts instructed by TWR. If, as seems likely, the TWR Group chooses to sell the portfolio of leases granted to SMG there is a provision that on the first rent review there will be a minimum increase in rents of 27% regardless of market rates at that time.’
Walkinshaw says that Tyrrell’s documentation is inaccurate and only tells his side of the story.
Immediately prior to the EGM Ecclestone persuaded Walkinshaw and Tyrrell to meet and Walkinshaw reiterated the offer he had made prior to the AGM (and which the BRDC Board had rejected) to underwrite the deal. Later, in the meeting, he made the same offer and other concessions to members made in the light of their objections to the initial transaction. Again, this was rejected, before Ecclestone himself offered to underwrite any losses incurred provided any profits were signed over to him. This was rejected too. The membership voted heavily in favour of attempting to unravel the deal. The first resolution failed with 320 members against and 71 in favour. The second succeeded by a similar margin, 320 for and 81 against.
It is said that a lynch mob attitude characterised the meeting, with calls to have a cooling off period in which to consider Walkinshaw’s capitulations rejected by a membership anxious to have the whole thing settled. There have been calls for resignation from some members, but Walkinshaw’s as Chairman of Silverstone Circuits was rejected by Sears that night, and the mood on the floor on the Tuesday evening was that the membership did not seek resignations over the issue, merely to unravel the deal. It is thus difficult to see where the situation goes now. Some believe that the Board members are liable for any losses incurred by the club, although the directors claim to be covered in that respect after its initial legal advice proved incorrect that the members did not have to be informed of the transaction before it was completed. There is thus a possibility of insurance cover, for at least part of the money.
But should the deal have been done at all? Talk to Walkinshaw’s detractors and there are many and they say it was done entirely to readdress shortcomings in his other financial affairs. Some see it as part of a Machiavellian plot hatched by Walkinshaw and Ecclestone to acquire the circuit in due course. Certainly, at the EGM there was very little focus on the business side. The hostility towards Walkinshaw and his transaction overrode everything as personal feelings boiled over.
The formation of Silverstone Motor Group was a highly ambitious deal, full of risk, but there is the argument that the best time to buy is at the bottom of the market. If you look objectively at TWR’s motor business over the past two years there is evidence of significant financial loss, but also of serious rationalisation within its dealerships, and also of a move to less opulent makes with wider market appeal. Big dealerships such as Davenport Vernon, Pendragon and Reg Vardy have all achieved what SMG aspires to, perhaps in a more favourable economic climate. The requisitionists deride SMG’s aim of a 780% increase in profitability between now and 1996, but Vardy, for example, achieved nearly double that…
Walkinshaw is unquestionably devoted to Silverstone. He first went there in 1968 with a tractor aboard his truck, having driven down from Edinburgh to Lincoln to collect it and been tempted into a detour. He was asked to move on by a man who then fell into conversation with him and became impressed with his commitment. Years later, when he was dying, Jimmy Brown remembered their talk and asked him specifically to take over as Chairman.
Probably the truth of the matter is that Walkinshaw, a man not always renowned for his subtlety in dealing with people for whom he has little respect, put the wrong deal to the wrong people at the wrong time and then compounded it by misjudging their mood. “There has been a total lack of understanding how this deal came about, who decided what. I don’t believe that some people basically wanted to understand it,” he says bitterly. Quite so.
“I was originally going to do the deal with another party but the Silverstone Board, which had been seeking investment opportunities for a couple of years, asked to examine the proposition. From the outset I stood down from the Silverstone Circuits Board at all times when it was evaluating the offer it eventually made. I saw none of the working papers and did not speak to a single director in connection with it.
“The BRDC set up Silverstone Circuits to manage the commercial side of the business but you can’t create a subsidiary, hire a board of directors and task them with maximising revenue for the group and then bitch when they go ahead and do it.”
Once the deal had got off on the wrong foot, for many there has been a heaven-sent opportunity to settle old scores that simply proved too good to pass up. The knives have been long and they have been sharp.
It was complicated, risky and still there are few who understand it fully. The dichotomy it produced is perhaps a reflection of that within the BRDC. Many members now view Walkinshaw with suspicion despite what many agree he has achieved for the circuit: he in turn has no time for the business acuity of the majority. For him diversification into an industry he already knows made perfect sense and might generate the cash Silverstone needs to keep the Grand Prix. For the majority of the members of a ‘gentleman’s club with its roots in the 1930s’ it was simply too high a profile proposition.
Quite what happens now remains to be seen. Walkinshaw has taken legal advice that the deal cannot be undone since money has already been dispersed, while Tyrrell refuses to comment at all on “the private affairs of a private business”. Do the requisitionists claim a hollow victory while leaving the deal in place and hoping that against their expectations SMG can at least live up to some of its promises? Or do they to initiate costly legal action to recover the money invested and perhaps risk losing everything? Will all the directors resign after the British GP? Will Walkinshaw buy back the BRDC share?
Right now there is only one certainty: some of the rifts created on both sides of the Silverstone Motor Group will never heal. D J T