NHRA Sold For $121 Millions To DirectTV Founders
|From NHRA Sources
The nations largest drag racing series has been sold to a group lead by several founders and developers of the highly successful satellite televison company DirecTV.
HD Partners Acquisition Corporation ("HD Partners") and the National Hot Rod Association ("NHRA"), the world's preeminent drag racing organization, has announced the signing of a definitive agreement under which HD Partners will acquire all of NHRA's professional racing assets, including the NHRA POWERade Drag Racing series, together with a broad set of rights to commercialize the NHRA brand.
Eddy Hartenstein, Chairman and Chief Executive Officer of HD Partners, said, "We are extremely excited by this truly unique sports media and entertainment opportunity, which provides an ideal platform for our management team to leverage their skills and expertise in creating and marketing compelling entertainment experiences and building strong brands.
NHRA President Tom Compton and his team have done a remarkable job positioning the NHRA POWERade Drag Racing series as one of the country's top motorsports events. We see tremendous opportunities in working closely with Tom, who will become President and CEO of NHRA Drag Racing, to take the sport of drag racing and the overall NHRA experience to the next level."
Wally Parks, Founder of the NHRA, said, "Today's announcement represents a monumental milestone in the 56-year history of the NHRA. By virtue of the agreements we have reached with HD Partners, we are positioning the NHRA POWERade Series for great future growth and success, while at the same time are assuring the long term vitality of the NHRA."
Upon closing of the transaction, Eddy Hartenstein will serve as Chairman of NHRA Pro Racing, and Tom Compton will assume the role of President and CEO and be a member of the Board. Robert Meyers, HD Partners' current Chief Financial Officer, will become the Chief Financial Officer of NHRA Pro Racing. Peter Clifford, currently Executive Vice President and General Manager of the NHRA, will become executive director of the NHRA, as well as a consultant to NHRA Pro Racing.
Dallas Gardner, Chairman of the Board of NHRA, said, "This transaction provides the best opportunity for NHRA to fulfill its core mandate to protect, preserve and promote the sport of drag racing. It provides long-term financial stability to the NHRA, an unhindered opportunity for the NHRA POWERade Drag Racing Series to flourish and grow, and an important strategic and long-term relationship between the NHRA and NHRA Pro Racing."
Tom Compton, president of the NHRA, said, "While we have made tremendous strides over the last eight years growing the professional side of the sport, today's announcement is the next logical step in the evolution of the sport of drag racing. This new relationship brings with it access to investment capital, additional expertise, relationships and complimentary skill sets to assist the current management team to drive key initiatives to accelerate the growth of the NHRA POWERade Drag Racing Series."
Under the terms of the agreement announced today, HD Partners will acquire:
-- The NHRA POWERade Drag Racing Series and all professional NHRA drag
racing assets and opportunities, including NHRA's existing television
broadcast agreement with ESPN;
-- An exclusive, worldwide, perpetual license to the NHRA brand for
professional drag racing activities;
-- Broad and extensive rights to commercialize the NHRA brand, including:
- Exclusive professional racing and "Official NHRA" sponsorship
and licensing rights;
- Exclusive media exploitation rights in broadcast television, home
entertainment and new media;
- Exclusive merchandising rights relating to both professional
racing and the stand-alone NHRA brand;
-- Four NHRA-owned race tracks, an additional long-term track lease in
Pomona, California and the NHRA headquarters building in Glendora,
-- A video and photo archive chronicling the history of drag racing,
which includes more than 20,000 hours of video and film.
The NHRA POWERade Drag Racing Series currently consists of 23 national events held at locations across the country. These multi-day events, which can draw as many as 125,000 spectators over three or more days, provide fans, racers and sponsors a unique ability to interact with each other through access to the racer pit area. In addition, NHRA's Nitro Alley display and interactive area located at each national event provides fans with a race-related entertainment experience, including the ability to get behind the wheel themselves in motorcycle and funny car simulators. All 23 national events are aired exclusively on ESPN2.
The NHRA will receive approximately $121 million in total consideration, consisting of approximately $100 million in cash, approximately $9.5 million in HD Partners common stock and the assumption by HD Partners of approximately $11.5 million in debt and liabilities. In addition to retaining its non-professional racing activities and sanctioning role, the NHRA will continue to offer its membership program and publish its weekly publication National Dragster. The closing of the asset purchase and related transactions is subject to stockholder approval, regulatory clearances and other customary closing conditions.
HD Partners will file a Current Report on Form 8-K with the Securities and Exchange Commission, which more fully describes the transaction.
In connection with the proposed acquisition, Morgan Joseph & Co. Inc. served as financial advisor to HD Partners and Latham and Watkins LLC were HD Partners' legal advisors. Duff & Phelps, LLC provided a fairness opinion to the HD Partners board of directors.
A nationally recognized investment banking firm provided a fairness opinion to the NHRA board of directors in connection with the transaction and Morrison and Foerster were the NHRA's legal advisors.
About HD Partners, Inc.
HD Partners is a company that was formed for the specific purpose of consummating a business combination in the media, entertainment and/or telecommunications industries. In June 2006, HD Partners raised $150 million in its initial public offering.
HD Partners was formed by Eddy Hartenstein, Robert Meyers, Larry Chapman, Steve Cox and Bruce Lederman, each of whom played senior roles in building DIRECTV to a business with over 12 million subscribers and over $7.7B in annual revenue. Mr. Hartenstein served as President of DIRECTV from its formation in 1990 through 2001, and Chairman and CEO from 2003-2003, and was responsible for assembling its management team and guiding its strategic efforts to establish DIRECTV as the world's leading digital television
Questions and answers concerning proposed acquisition of NHRA Pro Racing
Q: Why did NHRA enter into this transaction?
A: After careful consideration, the NHRA Board of Directors determined that this was the best opportunity for NHRA and its mandate to protect, preserve and promote the sport of drag racing for a number of reasons. First, it provides long-term financial stability to NHRA. Second, it provides the NHRA POWERade Drag Racing Series with an unhindered opportunity to flourish and grow with access to capital, key relationships and complementary skill sets to build and grow the professional series into a major sports entertainment property. Third, NHRA's Board of Directors believe that the important long-term strategic relationships that will remain between NHRA and NHRA Pro Racing, including the perpetual sanctioning relationship, will be of great benefit to the future strength and growth of sportsman and amateur racing as well as professional racing. And finally, this transaction will leave NHRA debt-free, financially strong, and ensure NHRA's long-term viability as the leader in the sport of drag racing.
Q: What are the other key elements of the deal?
A: NHRA Pro Racing will conduct professional drag racing while NHRA will focus on amateur and sportsman racing. NHRA Pro Racing has also entered into agreements with the association under which NHRA will provide racing operations and all sanctioning services to the new company. Finally, NHRA Pro Racing has been granted a set of rights to commercialize the NHRA brand, including rights related to the association's video and photo archives, multi-media products, new publications and merchandise.
Q: What type of relationship will exist between NHRA and NHRA Pro Racing? How will the two companies be structured to compliment each other?
A: The parties have established a long-term relationship which we believe facilitates the growth and expansion of drag racing at all levels as well as the optimization of the overall NHRA brand. NHRA will continue to focus on amateur and sportsman drag racing as well as National DRAGSTER, NHRA membership services and youth and educational programs. NHRA will sanction all NHRA Drag Racing events, including the NHRA POWERade Drag Racing Series events in perpetuity. In addition, NHRA will forever be involved in creating the rules that govern the sport. NHRA Pro Racing will focus on professional drag racing and the overall commercialization and expansion of the NHRA brand.
Q: How will this transaction help grow the NHRA POWERade Series?
A: NHRA Pro Racing brings with it a host of complimentary skill sets, substantial experience and key relationships to build upon the tremendous success we have currently achieved and take the NHRA POWERade Drag Racing Series to a new level while creating a totally unique sports entertainment asset with substantial near- and long-term growth potential. In addition, access to additional capital will be available to support new initiatives designed to build and grow the sport of NHRA POWERade Drag Racing.
Q: Will NHRA continue to have involvement in professional racing?
A: Yes. NHRA will sanction all NHRA POWERade Drag Racing Series events in perpetuity. In addition, NHRA will forever be involved in creating the rules that govern the sport.
Q: Does this effectively mean NHRA has been sold?
A: No. NHRA remains a non-profit corporation and will continue its original mission as a vibrant, active leader in the drag racing community, by virtue of both its ongoing role running amateur and sportsman racing and its ongoing relationship with the new company providing racing operations and sanctioning services to the NHRA POWERade Drag Racing Series. In fact, NHRA will be stronger than ever and extremely well positioned to pursue its core mission of promoting, protecting and preserving the sport of drag racing.
Q: Who owns NHRA now?
A: No one owns NHRA. It is a non-profit corporation and will continue to focus on amateur and sportsman drag racing, offer its membership program, publish its weekly publication National Dragster and continue its youth and educational programs. And because of the perpetual sanctioning relationship with NHRA Pro Racing, it ensures NHRA will continue its role as the premiere drag racing sanctioning body.
Q: Who will run NHRA? Who will run NHRA Pro Racing?
A: NHRA will be run by Peter Clifford, who will report to NHRA's Board of Directors. Tom Compton will become the new President and CEO of NHRA Pro Racing. In order to ensure a smooth transition and provide for continuity, agreements have also been reached for Peter to provide consulting services to NHRA Pro Racing, and for Tom to remain on the NHRA Board of Directors. In Peter's role as a consultant to NHRA Pro Racing, he will continue to assist Tom in managing many of the same day-to-day activities for which he is currently responsible.
Q: Who is NHRA Pro Racing? Who is HDP?
A: NHRA entered into an agreement to separate its professional series assets, including the NHRA POWERade Drag Racing Series, together with a broad set of rights to commercialize the NHRA Brand, and transfer those assets to a new company called NHRA Pro Racing, a wholly-owned subsidiary of HD Partners Acquisition Corporation, a publicly traded company.
HD Partners is a special purpose acquisition company that was formed for the specific purpose of acquiring a company in the media, entertainment or telecommunications industries. HD Partners is led by Eddy Hartenstein, who served as president and CEO of DIRECTV through its growth to become the world's leading digital television service with over 12 million customers and over $7.7 billion in annual revenue. The HD Partners team has substantial experience in managing and growing branded entertainment services.
Q: What is the make up of the management team at both companies?
A: Given the strong and deeply integrated relationship between NHRA and NHRA Pro Racing, both management teams will be working together. With that said, the management team assignments have been identified as follows:
NHRA Pro Racing: Tom Compton, President and CEO; Robert Meyers (of HD Partners), Chief Financial Officer; Gary Darcy, Senior Vice President Sales & Marketing; Glen Cromwell, Vice President National Event Marketing; Jerry Archambeault, Vice President Communications & Public Relations, Don Kraushar, Vice President-National Event Business
NHRA: Peter Clifford, Executive Director; Graham Light, Senior Vice President, Racing Operations; Adriane Ridder, Vice President Publications; Linda Louie, Vice President & General Counsel.
Q: What happens between now and when the deal closes?
A: It will be business as usual at NHRA between now and after the deal closes.
Q: When do you expect the deal to close?
A: Although the closing date cannot be predicted with certainty, we expect the deal to close prior to the end of the year.
Q: What happens after the deal closes?
A: NHRA Pro Racing will begin to operate the purchased assets and NHRA will continue to function as a non profit organization and operate the retained activities.