Shares for CART, organizer of the Grand Prix of St. Petersburg, fall almost 30 percent after a low offer to buy the company.
By JEFF HARRINGTON
Published August 19, 2003
[Times photo: James Borchuck]
Adrian Fernandez rounds a corner in a qualifying round in February's Grand Prix of St. Petersburg. The race's promoter vows to continue the race, whatever CART's future.
Championship Auto Racing Teams Inc., the ailing organizer of the Grand Prix of St. Petersburg, saw its shares fall almost 30 percent after an investor group offered to buy the company for less than a third of the stock's market value.
Open Wheel Racing Series, a newly formed holding company that includes a group of investors owning 23 percent of CART, offered to buy all outstanding shares in the company for about $7.4-million. The offer translates to 50 cents cash per share.
That must have come as a shock to investors because CART had been trading at just under $2 a share. Its stock fell to a new 52-week low, closing Monday at $1.30 a share, down 53 cents.
CART, which is based in Indianapolis, said in a statement Monday that it declined to sign the letter of intent from the offer but nonetheless has entered negotiations regarding a possible sale to Open Wheel's investors. CART chief financial officer Thomas L. Carter said through a spokeswoman there would be no comment beyond the statement.
Open Wheel, based in Menlo Park, Calif., includes Gerald Forsythe, Kevin Kalkhoven and Paul Gentilozzi, all of whom own cars that race in the CART series.
In a filing Friday with the Securities and Exchange Commission, Open Wheel said its offer was lower than the CART's market price because the company "will require significant additional capital" to keep operating. If the company tried to raise the money through the equity markets, CART shareholders would have their shares diluted more, Open Wheel said.
CART in June hired Bear Stearns & Co. to consider alternatives including a sale.
Earlier this month, the company reported a quarterly loss of $34.5-million. It said it needs to raise an unspecified amount of capital to complete the 2004 season because it has not been getting enough sponsorship revenue.
The Grand Prix of St. Petersburg was revived in February, with race cars noisily careering through the streets of downtown. Although the race was proclaimed a success by city leaders and promoters, its organizers lost about $1.3-million on the three-day event. One of its biggest financial shortcomings was the lack of a title sponsor.
Race promoter Dover Motorsports has vowed to continue the St. Petersburg event even if CART, its sanctioning group, is unable to continue.
The 2004 Grand Prix of St. Petersburg is scheduled to be held Feb. 20-22 and is to be broadcast nationwide by CBS.
St. Petersburg Mayor Rick Baker said Monday that he has no direct knowledge of CART's finances. Based on discussions with organizers, though, he said the race is still on.
"One of the comfort levels we have is, there are 18 or 19 races around the country that are part of this series," Baker said. "My belief is there will continue to be a series of some sort whatever happens."
- Information from Times files was used in this report. Jeff Harrington can be reached at harrington@sptimes.com or 813 226-3407.
