Formula E Racing Woos Carmakers Ahead of Possible IPO

Formula E, a new electric racing series bankrolled with $100 million by Boston Celtics managing partner Wyc Grousbeck and others, wants to seduce sports fans and carmakers with a view to a possible initial public offering.

The series, which opens in Beijing tomorrow, uses battery-powered cars made by Villeneuve-La-Guyard, France-based Spark Racing Technology that look similar to Formula One single-seaters, although are slower, don’t have engine roar and require a vehicle change mid-race. Renault SA is a series sponsor and Audi AG, which is backing one of 10 teams, also has “a foot in the door,” Formula E Chief Executive Officer Alejandro Agag said in an interview at the series offices in London.

Luring more carmakers is “very, very important” for the series and representatives from 10 auto companies will be guests in Beijing, Agag said. He declined to identify them, saying he didn’t want to jeopardize confidential negotiations. Carmakers have until Oct. 30 to express an interest in taking part in the second season, he added.

Carmakers will be watching for the public’s reaction and the reliability of the cars, according to Mark Gallagher, who has worked as an auto racing executive for Ford Motor Co. (F) and Cosworth Ltd. After qualifying at noon, the race starts in Beijing at 4 p.m. and will last about an hour.

Battery Life

“They’ll be looking to see whether it can give electric cars the wow factor,” Gallagher said. “If the cars last the full race distance and look quick then it will be very attractive.”

If the batteries die during the opening race on a 2.1-mile street circuit around the “Bird’s Nest” Olympic stadium, it may damp enthusiasm, Gallagher added. So far, there are nine races on the calendar, including events in Berlin, Buenos Aires, Miami, Los Angeles and Long Beach, California.

Among the drivers are two women -- Italy’s Michela Cerruti and Katherine Legge of the U.K -- and former Formula One racers such as Sebastien Buemi ofSwitzerland.

Enrique Banuelos, a developer who lost most of his $5 billion fortune in Spain’s real estate crash, is the biggest investor and Agag also holds a stake. They raised money from Grousbeck’sCauseway Media Partners among other investors last year, removing the need for a planned roadshow led by Barclays Capital Inc., Agag said.

Investors could hold an IPO in “anything from two to five years” or a sale to a private equity firm, Agag said. The holding company is domiciled in Hong Kong partly for a potential share sale, Agag added.

Formula One

Formula One, the most-watched racing series whose teams include Ferrari SpA and Daimler AG’s Mercedes, shelved an IPO inSingapore in 2012, citing market conditions. The series was valued at $10 billion that year in a lawsuit filed by Bluewaters Communications Holdings LLC.

Formula E will make most of its money from sponsorship and is on the way to covering the first-year costs, Agag said. Julius Baer Group Ltd, Switzerland’s third-largest wealth manager, said in a statement today it will join other brands including Deutsche Post AG’s courier DHL in becoming a series sponsor.

It will be shown by Fox Sports, the U.K.’s ITV and Sky Deutschland AG (SKYD), among other broadcasters. Teams will start with an annual budget of 3.5 million euros ($4.5 million) excluding research and development costs.

Car Swapping

Drivers will swap cars once during the race because technology doesn’t allow their batteries to be recharged fast enough. Qualcomm Inc. is working on a system that transmits electricity from coils in the road to the cars while they race, Paul Drayson, a former U.K. Science Minister who is a technology adviser to the TrulliGP team, said.

Formula E “is a sort of racing laboratory,” Drayson said by telephone. “It’s a bit like racing was back in the 1960s and 1970s.”

Auto companies will be more interested to see if Formula E can garner some of the popularity of Formula One than on trying out gadgetry, according to Christoph Stuermer, lead analyst at PwC Autofacts in Frankfurt.

Bayerische Motoren Werke AG (BMW) might eventually want to enter a team in the series, Gallagher said. BMW is supplying its i8 plug-in hybrid as a pace car if debris from a crash blocks the racetrack in Beijing. Toyota Motor Corp (7203) may also be interested, Stuermer said.

“It’s all about presence,” he said. “They want to hear their brand names being repeated again, again and again.”

To contact the reporter on this story: Alex Duff in Madrid at aduff4@bloomberg.net

To contact the editors responsible for this story: Christopher Elser at celser@bloomberg.netSara Marley