Petty Sold His Soul To Save RPM

We don’t normally read, let alone act on any PR emails we receive, but when I got a message about Forbes upcoming feature on NASCAR’s wealth, I got excited.  Every year, Forbes magazine does a ranking of the most valuable teams in NASCAR, along with a list of the highest paid drivers.  The leaders on both lists were Hendrick Motorsports and Dale Earnhardt Jr. respectively (no surprise there).  But what really caught my eye was a piece they did on Richard Petty’s re-emergence as the head of Richard Petty Motorsports.  In the story, some new information about the deal made with Andrew Murstein and Douglas Bergeron emerges, and the numbers and details are staggering.

Just as a quick refresher, remember that the Gilletts bought Richard Petty Motorsports before the 2009 season for $110 million.  They would later default on a $90 million loan that was part of the financing for the Petty deal.  Wachovia/Wells Fargo made attempts to restructure the debt with the Gilletts, at one time even offering to cut it down to $30 million.  Toward the end of the 2010 season, RPM began to struggle financially, and just barely finished the season with all four teams.  Following Homestead, Petty worked out a deal with investors Andrew Murstein and Douglas Bergeron to save RPM.

Now, here is where things get crazy.  According to Forbes, Murstein and Bergeron were able to buy the Gilletts’ outstanding $90 million note from Wells Fargo for a scant $11 million.  Then, Petty made a “several million dollar” investment of his own, and his stake was upped to something more substantial than his previous 4% share.  Petty topped off the deal by selling the rights to his name for “perpetuity.”  Wow.

So not only did RPM’s new owners buy the team for literally pennies on the dollar, but they also can make money off licensing out the Petty name for, well, forever.  Can we say steal of the century?

The Forbes piece goes on to say that of the $50 million RPM is expected to bring in via sponsorship deals this season, the company is expected to net between $5 and $6 million.  That means, depending on Petty’s stake, that Murstein and Bergeron could pay off their initial investment in as little as 2-3 years.  Not bad.

While it appears as though Petty basically sold his soul to save RPM, you almost have to gain a ton of respect for him.  We were on the verge of a NASCAR where the Petty name would cease to be apart of team ownership, and Richard did what was necessary to make sure that didn’t happen.  I don’t know how many people would have advised him to give up the rights to his name, and in essence the Petty brand, however (it certainly is a little crazy).  Even without this part, the new ownership group was getting a whole lot for very little. 

So, did Murstein and Bergeron get one hell of a deal?  Yep.  They didn’t get to where they are by seeking out bad deals after all.  And did Petty give up a lot to make this thing happen?  He sure did.  But at the end of the day, Petty is back at the helm of a NASCAR team, and the sport is a better place because of it.  Don’t be surprised if someday really soon, Richard Petty Motorsports sneaks it’s way into that top five of the Forbes most valuable NASCAR teams.

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4 Responses to “Petty Sold His Soul To Save RPM”

  1. steve says:

    I’m looking at it a little different. Of the $110 million paid by Gillett, Petty netted whatever percentage of equity he had (with Boston Ventures taking the rest). Maybe half? $55 million, pre tax. Not bad, although without a management role.

    Now comes the new guys. They buy RPM for $11 million, plus probably some amount of working capital, let’s assume, for the sake of rounding, $4 million, bringing the total investment to $15 million. Of this, Petty puts in ‘several million’, perhaps $7.5 million? If so, his ownership stake should have risen to somewhere plus or minus 50% (He may have had to taken a discount, but since the new owners wanted/needed Petty involved, perhaps not much of one).

    So… he ends up with $46.5 million ($55 less $7.5 mm)… and somewhere in the ballpark of 50% of the equity (which means he effectively only gave up half of the rights to his name)… operating control…. and the chance to be more than some old guy hanging around the track.

    That’s a sweet deal… and not what I would characterize as ‘selling his soul’.

  2. T.C. says:

    Steve: I get what you are saying, but your conclusion is based on a lot of assumptions… And think about this, if Petty really had tens of millions of dollars just lying around, why wouldn’t he have just bought RPM back from the Gilletts himself?

  3. The King is still the King in my book. I hope that Marcos and A.J. can make things happen this year.

  4. steve says:

    TC: true, lots of assumptions, I don’t know what the percentages are or how much Petty had gotten from Gillett. But he had to have some money laying around to come up with several million as his share. As to your second point, why would Petty spend only his own money when there were two guys willing to put up their money to help pay for the deal? Leverage, baby!

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