National Post from Toronto, Ontario, Canada • 80

MOLSON INDY E8 NATIONAL POST, SATURDAY, JULY 8, 2000 MOTION Ever considered taking your interest in racing off the track and into an investment? Here's the pitch from CARTs CEO Bobby Rahal: "We have the best form of racing in the world the most powerful cars, the most difficult to drive. I think this is a very solid business. As we grow it, all constituencies will benefit from it and prosper from it." Off the track, CART is casting its net in other markets BUSINESS OF RACING By Jim Middi.emiss The action on the CART circuit isn't always on the racetrack, as the publicly traded company that runs the series is undergoing major changes that will have an impact on the direction of racing. Gone is Andrew Craig, its CEO who took the company public and oversaw its rise from in annual revenues a few years ago to today. He has been replaced on an interim basis by Bobby Rahal, a business and increasingly sponsors are looking for global solutions said Craig, shortly before he was deposed on June 16.

That's why CART is expanding outside the U.S. borders. As well, International races tend to bring higher sanction fees. Rahal says that while North America is the core of the series "we believe it's legitimate and credible to take advantage of opportunities that may arise outside of the U.S." That includes Montreal, where a group has stepped forward with a proposal for a race in that city. CART has a strong global following.

It's broadcast in 195 countries and 19 languages to an estimated 987 million viewers, and those that run the series think there's a European appetite for U.S.-style oval racing. "Outside of North America, we would race on ovals. We're not trying to be Fl," Rahal says. Whether all the owners are on-side with growth outside North America and want to move into traditional Fl turf and increased travel remains to be seen. But Conder says, "it's in the best interest of the company and if the owners are shareholders, they'll figure it out." In terms of sponsorship, "CART does OK," says William Chips, editor of the Chicago-based Sponsorship Report.

He says CART's properties attract up from last year. But that's still behind NASCAR, at and CNW PHOTO Alex Tagliani of the Player's Racing team: The Lachenaie, rookie is prone to impatience, but he says he's working on it. A simple guy who is serious about racing dnver-turned-team-owner and critic of Craig. It's the beginning of a number of reforms that will see the series drop races in places like St. Louis and Miami and add foreign ventures like Mexico and likely Britain and Germany, where it will run on ovals.

It has also targeted a number of larger U.S. cities Atlanta, Boston, Denver, New York, Philadelphia, Phoenix, San Francisco and Washington that it wants to race in and could expand the season from 20 races to 26. Despite the boardroom shuffle, analysts are bullish on the stock. Timothy Conder, with A.G. Edwards and Sons, of St.

Louis, rates it as a buy, noting that by upgrading the sites at which CART races, it would add US2O0 to its earnings per share for a conservative estimate of for 2001. "In our opinion, it's our best risk-reward story in our current coverage," Conder says of the company, which trades under the symbol MPH on the New York Stock Exchange. "The company has no debt and they have $7-50 a share in cash," he says, adding that ALEX TAGLIANI ferently and you have to "always be alert to come into the pits." To get ready for his first season, he spent a few months in California working out with the team trainer five to six days a week. That included stretching, biking in the mountains, swimming, weight training and even skipping. "I think it's important to be ready physically, but I still have a lot of things to improve in my physique." He says that as a rookie, there's "more stress and more pressure." That's because "I don't know some of the tracks and I am not relaxed enough." One track that he does know, though, is Toronto, and he says he's looking forward to racing here.

"It's a good track for me." He says when he's on a track he knows, "I approach the race in a different way. I'm very aggressive. I can just go out and drive." So much for patience. 'I DON'T THINK THEY'RE DOING AS MUCH AS THEY CAN WITH LICENSING' ly. His father built race car engines for the Formula Ford 1600 series, and the young driver lists his racing idols as Aryton Senna and Gilles Villeneuve.

What impressed him the most about Villeneuve, he says, is that he was "simple, not a fancy guy" who came from a small town in Canada to "compete in the big leagues." They're character traits that he hopes to emulate. "I'm not the kind of guy who needs a lot. I like to be very low profile, very simple." Those who know Tagliani say his life is focused on racing. "He thinks about it a lot," notes Gid-ley. "He's very serious." Micklewright adds that Tagliani, who had six wins and 32 top-10 finishes in three seasons with the Player's Atlantic Team, "has an inner self-confidence he can draw upon at any time." He enjoys being around the track and is usually one of the last guys to leave at the end of the day "sometimes only after I insist he leaves," says Micklewright "I like to spend as much time as I can talking about racing and being around race cars.

That's what I like to do," Tagliani explains. Like many high-calibre athletes, he has superstitions. He carries a charm in his driver's suit and enters the car only from the left side. Early in his career, when he was "struggling," his grandmother asked her priest for some holy water, which Tagliani sprinkled on his car at her urging. Tagliani says it struck him that he had finally made it as a driver when he got to spring training in February and "saw all those guys on the track.

I realized I was running in the big league with everybody else." At first, he said, he had to get "used to the speed" of the cars. But the biggest difference is the strategy. "In Atlantic racing it's a sprint. You go flat out all the time." In CART, "you need to save fuel and save tires." The cars are set up dif- CART is sitting on more than in cash for Glen Reid, an analyst with Bear, Stearns Co. in New York, who follows the stock, is also bullish.

Based on a five-point system, with one being the best buy, he rates it a two. "The fundamentals are pretty sound. It's got a very se National Post cure revenue stream. Rahal, the new CEO, says "we have the best form of racing in the world the most powerful cars, the most difficult to drive. I think this is a very solid business.

As we grow it, all constituencies will benefit from it and prosper from it" As a business, CART is a somewhat incestuous creature. According to its recent 10-K filing with United States securities regula By Jim Middi.emiss While patience might be a virtue to most people, for a race car driver it can mean the difference between winning and losing. That's the tough lesson that rookie driver Alexandre Tagliani has learned this season on the Championship Auto Racing Team circuit "I think his impatience at this point is probably the only thing we're really working on. Other than that, I've been very, very pleased at his accomplishments," says Neil Micklewright, vice-president of operations at Play-er'sForsythe Racing Team. "He's becoming a better all-round driver." There's no doubt that the talented driver is having a stellar season.

He's challenging Team Rahal driver Kenny Brack, former Indy Racing League champ, for rook-ie-of-the year. He's had a fourth place finish in California, won a pole, led a couple of races and battled toe-to-toe with some of the best drivers on the circuit. However, were it not for a couple of rookie mistakes when he was leading two races, the native of Lachenaie, could be near the top of the leader board, rather than the middle of the pack. He was in contention to win the season opener in Homestead-Miami, when "Tags," as his teammates call him, passed the pace car and was penalized, finishing ninth. Then, in Rio de Janiero, it was a bittersweet weekend for the 27-year-old, who joined CART from the Atlantic Series after winning a drive-off for the open seat in the off-season.

He won the pole and dominated the race until 10 laps from the end, when he spun on a restart and handed the victory to Adrian Fernandez. "I lost two good opportunities to win races," concedes Tagliani, who got his start in racing at the age of 10 on a summer visit to Italy. His grandfather bought him a go-kart to race and shipped it home with the youngster when he left "I was trying too hard. I wanted to win my first race at any cost," says Tagliani, who was battling a vibration from the set of tires that were on the car before he spun. He says when he saw the tape of the Rio race, he was "not very happy.

I was pushing like hell for nothing." Memo Gidley, his teammate for pr- -j tors, there are almost 16 million outstanding shares, with 367 record holders of common stock. The board of directors is made up mostly of team owners, who as a group hold about 30 of the stock either directly or indirectly through their teams. That includes notable names like Patrick Racing (2.6), Team Rahal (4) Chip Ganassi Racing Teams, Inc. 4.6, NewmanHaas Racing (5.1), PacWest Racing Group (5.1) and Forsythe Racing, which recently added to its holdings for a total of 6. According to www.marketguide.com, 112 institutions hold 52 of the shares.

The stock has traded in a 52 week range between to and closed on June 28 at giving it a current market cap of about Total revenues have grown to Fl, which he estimates attracts in sponsorship money. Television revenues, at down 4 from last year, are woeful. However, CART's contract with ABC is up and the parties are re-negotiating. Conder estimates that TV rights are worth annually and could command especially if the CART and the Indy Racing League kiss and make up. The Indy 500, alone is worth to Rahal ranks the "restoration of and renewal and strengthening of current, past and future relationships" as high on the priority list.

Licensing is another area that's lagging. Bear, Stearns' Reid says: "I don't think they're doing as much as they can with licensing." However, he notes, "everything builds on itself. Once the sport gets more popular, more people watch and more people buy licensed products." Conder says the bigger question lies in where CART will spend the cash it's sitting on. He says acquisition spending to date, including the Indy Lights and Atlantic series, accounts for about leaving another to invest. CART says it will pursue "related properties," like go-kart centres, race schools and "virtual reality products." Reid says he thinks investors would be "leery of getting into capital-intensive" ventures like karting centres.

He thinks the money could be used to buy back shares, in a move that would eventually see the company return to private ownership. Rahal agrees that CART has been slow to spend the money. "We're a bit of a new company we want to be very prudent in how we spend the money," but he doubts there would be a return to private ownership. In the meantime, he says, the series needs to build stronger relations with its promoters, and CART would consider co-promoting events in desirable markets. "To build the sport, we have to register with people.

We have to attract people to the sport and the way do that is to make it attractive and exciting. Overall, our objective is to make CART the most popular form of racing in North America. National Post in 1999, up from in 1995. In addition to owning the CART se ries, it owns and sanctions the two open-wheel feeder race series, the Indy Lights Champi onship and the Atlantic The company, which employs almost 90 people, has five main revenue sources, sanction fees (52 of revenues) sponsorship (28), television (7), licensing (10) and engine leases and rebuilds for the Indy Lights series (3), which it owns. Sanction fees, which are paid by promoters who take on the risk of selling the tickets and holding the race, rose 17 from 1998-1999-They are multi-year contracts that range between to per race each that race because of an injury to Patrick Carpentier, says Tagliani was "obviously disappointed as any true racer would be," while Micklewright says it "took a day or two to raise his spirits.

He's his own worst critic." Gidley says he offered his teammate condolences, noting that "you learn from things like that." Indeed, Tagliani is learning quickly in his first year in CART, and the one thing he realized from the Rio race is that he has to be patient. "I don't need to rush everything." Tagliani grew up in a racing fami- CNW PHOTO year. Sponsorship was also up 17 over 1998. "We regard ourselves as a global Player's CART Team driver Alex Tagliani was pretty impressive as he worked his way up from 11th place on the grid to a fourth-place finish at the Long Beach Grand Prix earlier this season..