WILL THEY take it?(Competition)

As AutoWeek went to press, CART's management and board of directors were struggling to reach a purchase agreement with Open Wheel Racing Series LLC, a holding company recently organized to buy out and take the series private. Controlled by CART team owners Kevin Kalkhoven, Gerald Forsythe and Paul Gentilozzi, OWRS holds Forsythe's 3,377,400 shares in CART Inc., or about 22.9 percent of the series' common stock. OWRS has extended an offer to purchase the rest of the shares for fifty cents each, or about $7.4 million total, pledging an additional $15 million in funding to recapitalize the series.

Before the offer, CART shares traded in the $1.80 range, but quickly plunged to nearly a dollar on the news. While both sides have refused to speak publicly, sources said privately that recent media reports the company had declined the offer were false. "There's a lot of bad information going around in general,'' said one source. "It's not only damaging, we believe it's illegal.'' After the CART board met with representatives of OWRS on Saturday of the Montreal race weekend without reaching agreement, CART released a statement quoting CEO Chris Pook: "At an all-day meeting of Championship's Board of Directors on Saturday, management was given very clear direction to continue its negotiations with Open Wheel Racing Series and seek to conclude those negotiations as quickly as possible so that everyone clearly understands the future direction of the company.'' That can be taken to mean that Pook sees the offer from OWRS as the only viable option CART has, and a source close to OWRS echoed that view.

Meanwhile, the CART board has recently suffered its own upheavals: Directors Derrick Walker and Robert Biggs have resigned since the offer was presented, leaving only six directors, including Pook, still on the board.

What's next?

Once an agreement is reached, it must then be passed on to the shareholders for a vote. Meanwhile, time is running short, as reflected in Pook's statement. The shareholder vote might present its own obstacles and delays, including a potential proxy contest. Jonathan Vannini, CART's second-largest shareholder with 8.8 percent of the stock, lost some $17 million as CART's share price plummeted. However, as the OWRS disclosures indicate, its offer is based on its projected estimate of the cash value of the series, and that capital beyond the $15 million initially pledged will be required to operate the series after that. So while the offer seems like a low-ball at fifty cents a share, that is all the series is now worth in their estimation, and considerably more cash will be required to keep it afloat. "They have to take it [the OWRS offer],'' said one team official not connected to the buyout group. "What other choice do they have?''

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