John Malone’s Liberty Media Corp. (Nasdaq: LMCA) wants to revive global interest in Formula One auto racing by building its underdeveloped digital presence and expanding in markets like the U.S., while retaining loyal followers in the circuit’s European stronghold.

Liberty, which agreed to buy the company that controls the dominant international racing series from private equity firm CVC Capital Partners Ltd. for $4.4 billion, faces a challenge: Formula One’s global audience fell to 400 million last year from 600 million in 2008. Though television rights fees have grown as Formula One has shifted to pay TV from free broadcasts in some markets, sponsorship revenue has stagnated.

Liberty Media chief executive officer Greg Maffei, calling Formula One’s digital operations “underdeveloped,” said in a conference call that the company would look to harness technologies like virtual reality and video games in an effort to develop the fan base and generate new sources of revenue. Liberty Media will also consider adding new Grand Prix races and step up promotional activity, executives said.

“There’s interest in this sport around the world,” Chase Carey, a former top executive at Rupert Murdoch’s media empire who will become chairman of Liberty Media Group, said in a conference call. “We want to continue to intelligently explore the opportunities to continue to grow it. We do think there are opportunities to enhance the race calendar.”

Carey and Maffei see opportunities to develop new fans in Asia and the Americas. Formula One, which is dominated by European teams and drivers, has struggled to challenge Nascar and the Indianapolis 500 in the U.S., but its U.S. television audience has grown from a small base. With TV viewership slumping in some traditionally strong markets like the U.K., Formula One has added races in places like Azerbaijan, expanding to a record 21 events in the current season.

In order to grow, Liberty will have to balance the interests of hosts, which pay lucrative fees to stage the races, with those of fans, broadcasters, sponsors and teams like Ferrari, Mercedes and Red Bull Racing. Managing that task has been the job of Bernie Ecclestone, the British entrepreneur who founded Formula One in 1978. While the sale raises questions about Ecclestone’s long-term role, he’ll remain CEO, Liberty Media said.

Around the time of CVC’s 2006 purchase of Formula One, Ecclestone quelled a threat from teams to set up a rival car-racing series and his management involvement has continued since the CVC acquisition. After Liberty’s takeover, teams will be given a chance to invest in the circuit, the company said.

Despite falling TV viewership, Formula One remains attractive to marketers seeking to reach consumers around the world, said Nigel Geach, senior vice president for global motorsport at research company Nielsen Sports. Numbers have fallen in part because of the shift to pay TV, while audiences have rebounded in markets such as Germany, Italy and Brazil.

“F1 still poses a fantastic vehicle for brands looking to engage with not just avid fan bases, but a fan base which is truly global,” Geach said. “We will most likely see a marketing push to grow the sport further and to build interest among a wider and potentially younger audience base.”

The sale comes days after Dutch brewer Heineken NV started its Formula One sponsorship at the Italian Grand Prix. For Heineken, the deal is its largest sponsorship after soccer’s Champions League. Formula One offers the chance to reach as many as 200 million additional consumers, said Hans Erik Tuijt, head of global sponsorship at Heineken. “We will reach 500 million fans around the world and 200 million we weren’t talking to,” he said.

Under the terms of the deal, Liberty is acquiring an 18.7 percent stake in Formula 1 parent Delta Topco right away and will take full ownership later, according to a statement. Delta Topco investors, led by London-based CVC, will own 65 percent of Liberty Media Group, a unit of Liberty Media Corp., after the transaction.

Malone, a cable-TV entrepreneur who has built one of the leading global media empires, will retain control of the company through voting shares. Liberty Media’s sister company, Liberty Global Plc, owns cable networks like Virgin Media in the U.K. Malone recently agreed to sell Starz to Lions Gate Entertainment Corp. (NYSE: LGF).

The deal will provide a windfall for CVC, which bought control of Formula One from lenders a decade ago for $2 billion and later sold stakes to BlackRock Inc. and Waddell & Reed Financial Inc.

Liberty Media, based in Englewood, Colorado, will initially pay $746 million for its minority stake. In all, the sellers will receive $1.1 billion in cash, 138 million newly issued shares of Liberty’s LMCK, valued at about $3 billion, and a $351 million Formula 1 note exchangeable into LMCK stock. The companies put the total value of the deal at $8 billion, including debt.

The new Formula One Group will have three tracking stocks -- A, B & K. It will also include Liberty Media Group’s interest in Live Nation Entertainment Inc. and minority equity investments in Time Warner Inc. and Viacom Inc., according to the statement.

Morgan Stanley served as financial adviser to Liberty Media and Baker Botts LLP served as legal counsel. Delta Topco’s financial adviser was Goldman Sachs Group Inc. (NYSE: GS), while Freshfields Bruckhaus Deringer and Weil Gotshal & Manges were legal advisers.

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