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Wednesday, September 10
Beleaguered CART gets good news
By Robin Miller
Special to ESPN.com
The only people interested, financially speaking, in keeping Championship Auto Racing Teams (CART) alive have agreed to buy the beleaguered series and keep it running in the diversified format that separates it from any other.
Whether it's approved by the majority of shareholders remains to be seen but Open Wheel Racing Series LLC, a group of investors who are also car owners in CART and include Gerald Forsythe, Kevin Kalkhoven and Paul Gentilozzi, announced late Wednesday night it had signed a definitive agreement to acquire CART for $0.56 per share.
"Open Wheel Racing Series intends to fulfill its commitment to its fans by keeping Championship (CART) in its current format of ovals, road races and street courses," said Kalkhoven and Gentilozzi in a prepared statement. "It is our intention that Championship will be the premier open wheel series of the Americas.
"We will also take the opportunity of continuing successful overseas programs such as Surfer's Paradise in Australia."
Following weeks of serious concern among drivers, mechanics, owners and sponsors about whether CART could continue past 2003, this was the first positive news.
"We've all been patiently waiting and I was starting to get a little nervous but this is great news and I'm all for it," said Jimmy Vasser, the 1996 CART champion, from his home in Las Vegas.
"I want to stay involved in this series and I think this new group of owners have a lot of good ideas and a good business plan."
After this 24-year-old public company announced a few weeks ago it wouldn't have enough money to exist in 2004, OWRS came to life in the form of longtime Champ Car competitor Forsythe, who is also CART's No. 1 shareholder, and rookie CART owners Gentilozzi and Kalkhoven. Carl Russo, whose team recently captured CART's Toyota Atlantic championship, also joined the group along with Jamie Rose of MotoRock.
Their intention is to buy CART, take it private, cut the fat out of the front office, compact the 2004 schedule to the most popular venues and use MotoRock's musical promotions to try and attract a new fan base.
But, most importantly, they're commited to putting up as much as $25 million apiece to stay in business.
"None of us want to own a series but we had to do something because it didn't look like anybody else was going to put in an offer and it was obvious CART was going to vanish before the end of 2004," Russo told ESPN.com two weeks ago in Denver.
"We all believe in the product and we're willing to invest in its future."
This transaction still must be approved by stockholders holding the majority of outstanding shares but it's unlikely anyone is going to step up and make a better offer for a company that owns no tangible property -- only contracts with race tracks.
And while Forsythe controls 3,377,400 shares, or 22.9 percent of CART, the No. 2 stockholder could be the key player in this deal.
Jon Vannini, a driver in CART's Barber Dodge Pro Series who happens to own 12 percent of CART's stock, has watched his $15 million investment plummet to under $300,000 in value.
Vannini was reportedly enraged when CART announced its bleak financial outlook and it's long been rumored he might sue for mismanagement. He was quoted Tuesday night on AutoRacing1.com's web site:
"In my judgement, this buyout proposal is pure fantasy. I simply don't see the majority of shareholders voting in favor of this deal. I know I won't."
OWRS has until Sept. 18, 2003 to terminate this agreement and are also receptive to other offers, in which case OWRS would receive a $350,000 termination fee. If the majority of non-interested shareholders does not accept OWRS offer, the next option for CART could be bankruptcy.
The rise and fall of CART is a study in greed, mismanagement and stupidity.
A circuit formed and run by car owners in 1979 because of the incompetence of the United States Auto Club, CART had taken over all Indy-car racing except the Indianapolis 500 by 1982. Despite the in-fighting and lack of leadership, CART found itself on top of the motorsports world by 1993 when Nigel Mansell chose to come to CART rather than defend his Formula One title. By 1995, CART had $400 million worth of sponsorship, great depth of talent and was playing to packed houses all over the United States and a big international TV audience -- which concerned F-1 supremo Bernie Ecclestone.
But, when Tony George started the Indy Racing League in 1996, open wheel racing became divided, fans became confused, sponsors became disgusted and TV ratings began to drop along with attendance.
In 1998, CART decided to go public and its shares opened at $16 -- going as high as $35 a year later.
CART still had everything but the Indy 500 from '96-2001 but alienated Honda and Toyota with pathetic officiating and an inability to come up with a new engine formula -- driving them to the IRL.
Roger Penske, a co-founder of CART who sold his stock for a nice profit before defecting to the IRL full-time in 2002, was followed to George's all-oval series this year by Chip Ganassi's 4-time CART champs, Michael Andretti's new team and Morris Nunn.
With all those defections, CART CEO Chris Pook spent an estimated $60 million this season to finance and field several of the 19 cars on the current grid. CART has also spent millions for its races to be televised on CBS and Speed. By year's end, it's estimated CART's kitty (once $120 million) will be under $25 million.
CART's stock was at $5.28 earlier this year but closed Wednesday at .88 cents a share. OWRS offered $0.50 a share two weeks ago and then agreed to pay $0.56.
The question remains: is that a bargain price or waste of money?
Robin Miller covers open wheel racing for ESPN and ESPN.com.Send this story to a friend | Most sent stories