One of the top-performing Formula One team owners, McLaren is currently in talks with Bahrain and Saudi sovereign wealth funds regarding a massive capital investment of £250 million to fund its investment in the electric vehicle industry.
The supercar manufacturer and more well-known Formula team owner are in advanced talks in raising capital to fund its venture into the electric vehicle (EV) market. The final figure which is being discussed has yet to be determined but it’s more than likely that it could exceed £250m. This investment is vital in order for McLaren to prosper into the next era of the evolution of the now-new electric car industry.
Delivery delays
McLaren had planned to launch its new Artura hybrid supercar but has been hit with ongoing delivery delays. The new car has received great reviews but has been unable to bring to market due to having to implement what is described as “technical upgrades to ensure Artura customers enjoy optimum long-term performance”.
As a result of the upgrades, it’s now severely impacted the supply chain process, hence causing delays in the delivery of the new Artura until the end of the year. McLaren is now having to slow production, which is never a good thing for any car manufacturer, especially in the current difficult car marketplace in the UK.
Mumtalakat Holding
A long-standing McLaren shareholder, Mumtalakat Holding, and Saudi’s Public Investment Fund are also expected to commit to the new fundraising venture into McLaren, and Ares Management, another McLaren investor, is also likely to be a major player to inject funds as a long term investment.
It was only a few days previously that Mumtalakat had acquired part of McLaren’s cherished heritage car collection as part of an additional £100m investment. So in theory, the £250m will amount to £350m, if all goes according to plan. This will give shareholders the assurance that the proper funding will be provided to be a major player in the electric supercar market.
Third quarter earnings
McLaren recently held a third-quarter earnings call, saying it was actively “in talks with all shareholders regarding a recapitalization of the group”, but the call didn’t elaborate on the size or structure of a prospective deal. The funds raised will be entirely reserved for McLaren Automotive and will not be diverted to its Racing subsidiary which is now a standalone entity within the McLaren group, as there is no need for any additional financial support.
At the beginning of the year, Michael Leiters was named the new boss of McLaren’s road-car division. As with most companies worldwide, McLaren was also affected by the COVID-19 pandemic, having to make hundreds of employees redundant and force into doing financial restructuring, in order to steady the ship.
Racing division
Zak Brown, the head of the Racing division has orchestrated a turnaround of McLaren’s Formula One sector, and with the help of drivers, Daniel Ricciardo and Lando Norris, things are looking a lot better for the Racing division of the group.
McLaren has also undertaken a series of corporate transactions which had to be addressed due to the pandemic which involved seeking a loan from the UK government, this however was rebuffed by ministers. As a result, Paul Walsh, the former Diageo chief who joined McLaren in 2020 as Executive Chairman was tasked with overseeing the sale of a stake in McLaren Racing to a separate group of investors, as well as a £170m sale-and-leaseback of its highly impressive Surrey headquarters.
Last year, it also sold McLaren Applied Technologies, which generates revenue from sales to corporate customers. McLaren was founded in 1963 by Bruce McLaren, the group has one of the most successful and famous names in British motorsport.
McLaren can pride itself on a whole plethora of F1 successes which includes winners of the F1 constructors’ championship eight times, 180 Grand Prix wins, three Indianapolis 500s, and the Le Mans 24 Hours on its debut.
It was also the home of famous drivers, such as Lewis Hamilton, Alain Prost, Aryton Senna, and Mika Hakkinen.
McLaren’s on-track operations have accounted for approximately 20% of the group’s annual revenues. With the departure of Ron Dennis, the former boss of McLaren who steered its F1 team to the most successful period in McLaren’s history. Due to a bitter dispute with fellow shareholders, Mr. Dennis offloaded his £275m stake in 2017 and went on to undertake other business ventures.
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