News from The Globe and Mail
Russian émigré drives off with F1 team
Tuesday, January 25, 2005
Move over Eugene Melnyk, there's a new Canadian multimillionaire on the sports scene.
Alex Shnaider may not be a household name in Canada, but the Toronto businessman has just bought a Formula One racing team, giving him entry into one of the world's most high-profile and expensive sports.
Shnaider, 36, said yesterday that his company, Midland Group, is buying the Jordan team and plans to change the name to Midland F1 next season.
He's reportedly paying about £30-million (roughly $69-million) for the team and expects to lay out at least $122-million annually to keep it competitive.
"The ultimate would have been to set up a team from scratch, but commercially, it makes more sense to buy an existing team," Shnaider said from his Toronto office.
Shnaider, a Russian émigré, is sparing no expense for his new entry. He's planning a splashy launch for the team next month in Moscow's Red Square and plans to invite Russian President Vladimir Putin.
"I'm excited," Shnaider said, adding that his team is developing its own car. "I'm excited that we are in [F1]."
Although a long-time racing fan, Shnaider has built his fortune in the more mundane pursuit of steel trading. Born in St. Petersburg, Shnaider immigrated to Toronto through Israel at the age of 13.
While studying economics at York University in the early 1990s, Shnaider watched as the Soviet Union collapsed.
He started looking for business opportunities.
He began exporting consumer goods to his former homeland when an associate led him to the steel business. He soon discovered that the former state-run steel mills were producing mountains of steel but had no idea how to sell it, or where. Under the Soviets, "everything was controlled via Moscow," he said. The mills "offered me to take steel because they didn't know what to do with the steel."
He began buying up tonnes of cheap metal from mills in Ukraine, Russia and elsewhere and selling it through brokers in the Middle East, Southeast Asia and China. It proved to be a lucrative business. "The difference was huge between the domestic price for steel at the mill -- because the mill had no idea what to do with it -- and the export price," he said.
Soon he began buying the mills themselves. He also branched out into trading other goods, such as iron ore, coal, scrap metal and agricultural products.
After graduating from York University in 1991, he left for Europe and spent five years living in Switzerland and Belgium, building up the business. He returned to Toronto, but still spends so much time outside Canada that he has considered moving back to Europe with his wife and two children.
Today, Midland operates across Eastern Europe and has about $2-billion (U.S.) in annual revenue. Its holdings include real-estate interests in Moscow and Toronto, where he is behind construction of the $500-million (Canadian) Trump International Hotel & Tower, expected to be the tallest building in Canada.
He was also recently approached to join a bid for Stelco Inc. of Hamilton, which is under bankruptcy protection, but says he turned down the proposal.
Not everything has gone smoothly. In 1999, Shnaider hooked up with some investors in a Canadian gas company called Founder Resources. It was delisted from the TSX Venture Exchange a couple of years ago after running into financial trouble. Shnaider says he lost more than $1-million.
"It left me with kind of a bad taste in my mouth about investments here," he said, adding that he has not made any investments in Canadian companies since then.
Shnaider's entry into Formula One comes at a difficult time for the sport. Last fall, Ford Motor Co. announced it was dropping its Jaguar team, saying it could no longer justify the $150-million (U.S.) annual cost. Shnaider considered buying the team, but dropped the idea, feeling that Jaguar had too many employees.
Jordan has run into financial trouble and the sport has faced bitter division among teams over their commercial arrangements and the leadership of controversial racing boss Bernie Ecclestone. But Shnaider is confident the sport has turned the corner. "There is a consensus between the teams to reduce the budgets, to reduce staffing, not to spend money like it's water," he said.
He also had high praise for Ecclestone, who suggested he buy the Jordan team last December. "I don't think F1 would be the same without Bernie Ecclestone," he said. "He's a brilliant, brilliant man."
Shnaider said he plans to use the F1 team to promote the Midland Group, which he jointly owns with a British partner. A source close to him said he might consider buying other sports teams, but when asked about that, Shnaider demurred. "I like to watch a Leafs game or a Raptors game," he said.
When asked whether he would consider buying a National Hockey League team, he laughed and said: "I don't know. With the way the NHL is going this year, I don't know if I would want to be a team owner."
© The Globe and Mail