To merge or not to merge, that is the question

September 5, 2011

Interesting post from Velocast on the Leo-Shack merger rumors. While I agree with his conclusion that the rumors may very well originate from Bruyneel’s desk, that doesn’t mean there are no merger talks.

After all, if there are no talks and Bruyneel is just “playing with Becca’s balls” as Basso would say, then I am sure Becca would issue a pretty strong rebuttal and Nygaard would too. Instead, the latter has changed his usually daily tweeting to posting three tweets in the last two weeks, none of them cycling-related and one that mysteriously said:

As one my good friends said the other day: integrity is what we do when others aren’t watching.

Velocast mentions that Trek currently shows Leopard everywhere and Radioshack nowhere in their events and advertising collateral and uses this as proof that they are not behind an attempt to insert Bruyneel into Leopard.

You could also argue the opposite. One of the world’s biggest bike companies has long-term contracts with two teams (both signed recently and in full sanity). Yet it uses only one team and completely ignores the other. Methinks that indicates something is going on, rather than that there’s nothing to see here.

Velocast’s main argument is this:

The central point that L’Equipe fails to tackle is that Becca has made a 4-year guarantee to the UCI to fund the Leopard-Trek team. An individual rider, such as Roman Kireyev for example, can be made to conveniently “disappear”. But a four year commitment to the UCI simply cannot. That, frankly, is drawing too much attention to places where the UCI does not want attention to be drawn. Creative accounting and administrative slight of hand wouldn’t allow those involved to wriggle free from that kind of mess.

But there is no such thing as a 4-year guarantee. In the license application, the paying agent would have indicated their desire to run this team for at least four years in order to obtain a 4-year license. There would be contracts showing the budget for 2011 being covered, and some of them extending into 2012, 2013 and maybe even 2014.

But the UCI understands that virtually no team already has all their sponsors lined up 3 years in advance, so they’re not demanding that those future year budgets are fully covered. They couldn’t. The requirement is as per article 2.15.068 to show:

financial planning for the period covered by the licence application or the remainder of the licence period.

That’s a forecast, not a guarantee. The guarantee teams need to provide is a bank guarantee. And regardless of the length of the license, such a bank guarantee covers 3 months of salaries. UCI regulation 2.15.098:

The amount of the guarantee shall represent one quarter of all the gross sums due for payment by the UCI ProTeam to riders and persons under contract for the operation of the team during the registration year.

In no case may the amount of the bank guarantee be less than CHF 975,000.

Does this mean I think a Leo-Shack merger will happen? Not necessarily, because cycling mergers are EXTREMELY difficult, I believe much more so than “standard” company mergers, so the chance of success is limited. But talks are definitely going on.

More on that later today. If you don’t want to miss that, you can subscribe here.

One Response to “To merge or not to merge, that is the question”

  1. meylina8 Says:

    Thanks. Your analysis is more interesting than the print journos’. Keep it up.

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