31st Jan 2020 08:19
(Alliance News) - Aston Martin Lagonda Global Hld PLC on Friday has agreed to a series of investments totalling GBP500 million, including GBP182 million from a consortium led by Formula 1 racing team owner Lance Stroll.
Stroll - who bought the Force India racing team in 2018, changing its name to Racing Point - will become Aston Martin's executive chair as part of the investment, with Penny Hughes stepping aside.
The luxury carmaker said the investment will improve its liquidity following a "challenging" 2019.
Aston Martin will place 45.6 million new ordinary shares at a price of 400 pence per share to raise the GBP182 million, which will be acquired by the consortium.
Shares in Aston Martin closed at 402.70 pence each in London on Thursday. The shares jumped 25% on Friday morning to 503.20p. The carmaker's IPO price back in 2018 was 1,700p.
This will then be followed by an underwritten rights issue to raise GBP318 million, which will take place after the release of the company's annual results. The consortium is expected to partake in the rights issue taking its total investment to GBP235 million.
This will give the consortium a 20% stake in Aston Martin. The carmaker's majority shareholders - Prestige/Strategic European Investment Group and Adeem/Primewagon - are supporting the rights offer, and have agreed to take their stake down to 51% from 61%.
The net proceeds from the proposed placing and rights issue will also be used to finance the ramp-up in production of the company's DBX car.
The financial rescue package hands the company a lifeline following a string of profit warnings last year.
Aston Martin Lagonda said it is to conduct an operational and financial review to strengthen its balance sheet to "necessarily and immediately" improve liquidity and reduce leverage.
"Today's fundraising is necessary and provides a platform to support the long-term future of the company. Stroll brings strong and proven expertise in both automotive and luxury brands more widely which we believe will be of significant benefit to Aston Martin Lagonda. Following a comprehensive review, today we announce a series of immediate actions to reset, stabilise and de-risk the business, positioning it for controlled, long-term profitable growth. These include rebalancing supply-demand dynamics, reducing capital expenditure and the re-phasing of some future product launches, together with cost-efficiency initiatives," said Aston Chief Executive Officer Andy Palmer.
Additionally, Yew Tree Overseas Ltd - which is run by Stroll - has agreed to immediately provide GBP55.5 million for short-term working capital. This will be refunded to Stroll once the placing is completed.
Aston Martin said this short-term investment means it will not have to draw on its maligned USD100 million delayed draw notes. The investment from Stroll was made with "significantly favourable" terms to the notes, the carmaker said.
Finally, the carmaker will be entering Formula 1, under the guidance of Stroll - whose son, Lance, currently drives in the sport. Starting from the 2021 season, Racing Point will become the Aston Martin F1 team.
The deal is for 10 years.
The company will continue to sponsor the Red Bull racing team in the 2020 season.
Turing to Aston Martin's trading performance, the company said going forward it will focus on "providing greater financial and operational stability and flexibility through controlling medium-term investment, improving cash generation and re-phasing product cadence".
The company also said it will delay its investment into making electric cars to beyond 2025.
To turn its performance around, Aston Martin has identified several "key priorities", which includes controlling its production to build a stronger order book and regain price positioning. The company is also set to launch its DBX in the second quarter, and will relaunch its Vantage and Roadster cars.
Aston Martin is also looking to reduce its cost base by GBP10 million on an annual basis, with GBP7 million expected in 2020.
Stroll added: "I, and my partners, firmly believe that Aston Martin is one of the great global luxury car brands. I believe that this combination of capital and my experience of both the motor industry and building highly successful global brands will mean that, over time, we fulfil Aston Martin Lagonda's potential."
By Paul McGowan; [email protected]
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