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JANUARY 17, 2000

Arrows buyout on rocky ground

PLANS for a consortium of European technology and media companies - fronted by former Tyrrell marketing director RupertÊManwaring - to buy the Arrows team may require more money than the group currently has available. MorganÊGrenfellÊPrivateÊEquityÊLtd. wants to sell its share of the team but the problem is that MGPE owns only 45% of the shares. Another 45% is owned by Tom Walkinshaw and the remaining 10% is owned by neither but controlled by both.

In effect this means that the Arrows team is a 50-50 partnership but Tom Walkinshaw is chairman and has the casting vote which means that he has ultimate control of the team. The consortium wants to run its own operation and so will need to come up with an offer which will see Walkinshaw agree to sell his part of the team.

The problem is that Walkinshaw has no reason to sell - despite the fact that his marketing team has not yet managed to come up with a budget for the coming season. Our sources say that Arrows is at least $20m short of the minimum budget it requires and that figure includes money from the yet-to-be-announced second driver Jos Verstappen. Not surprisingly, the Dutchman is not keen to commit himself until Arrows looks like having enough money to do a decent job.

Walkinshaw is not looking like a man who is planning to sell. Last week he launched a new corporate logo for the team in an effort to start building up a new image. We also hear that he has once again restructured the companies which run the Formula 1 operation. This will make a deal even more complicated than before.

The only thing that is likely to change Walkinshaw's mind is more money as this would enable Tom to extricate himself from Arrows at a profit and use the money to make a bid for another team. This would almost certainly be Benetton. The Italian-owned team is not currently for sale but - if the poor results of recent years continue - the Benetton Family may conclude that it is better to sell a share of the team to somehow who can run it for them. David Richards of Prodrive tried to do a deal in 1998 but was rebuffed and since his departure the team has gone nowhere. A bid from Walkinshaw might be welcomed. The Benettons know Tom from 1994 - when he was a partner in the controversial World Championship-winning program with Michael Schumacher. Tom might also be able to sweeten the deal by taking a lot of the current Arrows engineering staff with him.

If Walkinshaw decides to hold on to Arrows, the consortium may have to turn its attention to a bid for Benetton.