Jun 25, 2007

NHRA Sells Pro Drag Racing Rights

A little-heralded announcement signals a sea change in one of the most popular grassroots motorsports. The simple premise of drag racing is as easy to understand as pulling away from a stoplight and trying to beat the guy in the car next to you to the next intersection. And that simple premise, which was codified by pioneers like Wally Parks and the late Robert E. Petersen (who used to be my boss), has become a multi-million dollar entity.  Now that entity is ready to go to the next level, and our guess is that it will change very radically and very quickly.

Drag racing is making a move to become truly big league. Leading that charge will be a company called HD Partners Acquisition Corporation, which just entered into an agreement with the National Hot Rod Association (NHRA) to acquire all of NHRA's professional racing assets, including the NHRA POWERade Drag Racing series. The company is creating a subsidiary, NHRA Pro Racing, to operate, merchandise, and promote the pro drag racing series and commercialize the NHRA brand. The NHRA will remain a non-profit corporation and retain all its non-professional racing, safety and educational activities. It will also continue to be the sanctioning body for all NHRA racing activities, including the NHRA POWERade Drag Racing Series.

The NHRA professional series currently consists of 23 national events held at locations across the country. These multi-day events, which can draw as many as 125,000 spectators over a long weekend, are known for the nearly unlimited access spectators have to the professional competitors. Fans, racers and sponsors freely interact with each other in the racer pit area, and that aspect of the sport, combined with the fact that thousands of amateur drivers participate in NHRA-sanctioned events, makes it a truly grassroots experience unlike any of the "major" sports. And maybe that's part of the problem. Outside observers have felt for years that drag racing could be an even stronger attendance and television draw. All 23 national events are aired exclusively on ESPN2, but there are those who believe the presentation could be stronger and the ratings higher with the right kind of management brought to bear. A nonprofit entity is probably not the right kind of organization to make that happen.

The NHRA will receive approximately $121 million in the deal -- approximately $100 million in cash, about $9.5 million in HD Partners common stock and the assumption by HD Partners of approximately $11.5 million in debt and liabilities. In addition to retaining its non-professional racing activities and sanctioning role, the NHRA will continue to offer its membership program and publish its weekly publication National Dragster.

"We are extremely excited by this truly unique sports media and entertainment opportunity, which provides an ideal platform for our management team to leverage their skills and expertise in creating and marketing compelling entertainment experiences and building strong brands," said Eddy Hartenstein, chairman and CEO of HD Partners. "We see tremendous opportunities ... to take the sport of drag racing and the overall NHRA experience to the next level."

Hartenstein is the former vice-chairman of the DIRECTV Group and former president of DIRECTV, the leading satellite TV provider in the United States. He was instrumental in putting together sports-oriented TV packages while at that subsidiary of Hughes Communications, Inc., purchased by Fox in 2004.

"Today's announcement represents a monumental milestone in the 56-year history of the NHRA," said Wally Parks, founder of the NHRA. "By virtue of the agreements we have reached with HD Partners, we are positioning the NHRA POWERade Series for great future growth and success, while at the same time assuring the long term vitality of the NHRA."