Coronavirus: McLaren weighs sale of stake in Formula One team
McLaren Group is considering the sale of a minority stake in its Formula One (F1) team as it tries to raise hundreds of millions of pounds to steer it through the COVID-19 crisis.
Sky News can reveal that McLaren has raised the prospect of such a deal during discussions with advisers and lenders in the last few days.
Sources said the idea was at “a conceptual stage” and was being discussed alongside other funding options, including raising capital from existing bondholders.
Bankers have yet to be formally appointed to handle a process, they added.
Any transaction is likely to involve selling between 20% and 30% of McLaren’s F1 business – a deal that would generate tens of millions of pounds.
McLaren is among the most historic names in the F1 paddock, and during more than half a century of competing has won eight F1 constructors’ championships.
The team’s drivers have included the likes of Mika Hakkinen, Lewis Hamilton, Alain Prost and Ayrton Senna.
It has fallen on leaner times on the track during the last decade, although under its current racing boss, Zak Brown, its fortunes have begun to revive.
Insiders suggested that the sale of a minority shareholding would help to provide sufficient funds to assist Mr Brown’s ambition of seeing McLaren compete again for F1 drivers’ and constructors’ titles in the coming years.
An annual budget cap will be introduced across the sport from next year, starting at $145m (£115m) for each team, falling in the ensuing years to $135m (£107m).
One source said that selling a minority stake could help enable McLaren to operate at the level of the budget cap on a sustainable basis.
The stalled F1 season is due to get underway in Austria next month, with two Grands Prix scheduled to take place at Silverstone as part of the truncated campaign.
McLaren’s on-track operations, which include its participation in the Indianapolis 500 race, account for roughly 20% of the group’s annual revenues.
The team’s drivers this year are Lando Norris and Carlos Sainz Jr.
It has struck sponsorship deals with companies including Darktrace, the cyber security software provider, and upgraded British American Tobacco to a “principal partnership” – despite the ban on tobacco advertising in the sport.
If it proceeds with the disposal of a minority stake, it would come as rival British F1 team Williams explores an outright sale in an attempt to remain in business.
Williams’ formal sale process is being handled by bankers at Allen & Co and Lazard.
For McLaren Group, the deliberations about its F1 ownership form part of a broader attempt to refinance the company.
Talks with its syndicate of existing bondholders became fractious last month when it proposed raising between £250m and £275m by mortgaging part of its classic car collection and its spectacular Surrey headquarters.
Some of the funds which have lent money to the group had argued that its outstanding bonds included security over those assets.
However, in recent days, discussions between the two sides are said to have become more constructive, with an agreement possible as early as next week.
McLaren is continuing to consider alternative funding options as well, according to insiders.
The automotive group recorded a £133m loss in the first quarter of the year, as its F1 and road-car operations were hurt by the coronavirus pandemic.
Last month, McLaren cut 1200 jobs across its operations as part of a restructuring plan affecting more than a quarter of its workforce.
McLaren is owned by investors led by Mumtalakat, Bahrain’s sovereign wealth fund, which injected £300m of equity into the company as recently as March.
It is understood to have told lenders that existing shareholders were not willing to inject further equity into McLaren.
McLaren’s drive to access new funding has been accelerated in the wake of a request for a £150m loan from the government being rejected.
Sky News revealed in April that McLaren had approached the Department for Business, Energy and Industrial Strategy (BEIS) with the funding request after seeing sales of its supercars evaporate.
Orders are said to have rebounded strongly in recent weeks.
McLaren is a major British exporter, supporting thousands of jobs across the UK supply chain.
The talks about financing options comes not long after McLaren parachuted in Paul Walsh, the heavyweight former boss of Diageo, as executive chairman – a move that stoked speculation that McLaren’s shareholders ultimately wanted to take the company public.
McLaren’s road-car division, which was previously a semi-independent company called McLaren Automotive, makes some of the world’s most expensive cars, with models including the Senna – named after its legendary former F1 driver, Ayrton Senna.
The unit, which is run by Mike Flewitt, represents the majority of the group’s sales.
The British company saw its separate divisions reunited following the departure in 2017 of Ron Dennis, the veteran McLaren boss who had steered its F1 team through the most successful period in its history.
He became one of Britain’s best-known businessmen, expanding McLaren’s technology ventures into a wide range of other industries through lucrative commercial partnerships.
Mr Dennis offloaded his stake in a £275m deal following a bitter dispute with fellow shareholders.
He had presented to McLaren’s board a £1.65bn takeover bid from a consortium of Chinese investors, but did not attract support for it from boardroom colleagues.
McLaren declined to comment.
Source: Read Full Article