McLaren Group races toward new horizons
Mumtalakat fund reveals state’s ambitions for the newly formed group
Bahrain’s main sovereign wealth fund will set a new course for the McLaren race car group after wresting full control from Ron Dennis, who announced his official retirement on Friday after nearly four decades in the driver’s seat.
The US$11 billion Bahrain Mumtalakat Holding Company, which had resisted two attempts by Mr Dennis to buy out its 50 per cent shareholding, as well as the quarter stake owned by his long- time business partner, Saudi Arabia- born Mansour Ojjeh, said after Mr Dennis’ announcement that it would address the company’s future shortly.
“There will be time in the near future to outline our plans,” said Sheikh Mohammed bin Essa Al Khalifa, executive chairman of McLaren Group, the name the company has reverted to, incorporating McLaren Automotive and McLaren Technology Group, which owns McLaren Racing (competing as the McLaren Honda team).
“The coming months and years will be an extremely exciting time in the story of McLaren,” said Sheikh Mohammed, who is a Mumtalakat board member and senior adviser to the Bahraini Crown Prince Salman bin Hamad Al Khalifa.
Mumtalakat did not disclose the value of the deal, but the McLaren Group is estimated to be worth about £1.2bn (Dh5.74bn), according to McLaren last year.
One of the first items on the agenda will be raising an unspecified amount of debt financing, which is being arranged by JP Morgan.
McLaren under Mr Dennis had been the most successful Formula One racing team in history, with glory periods that included championships in the 1970s with drivers Emerson Fittipaldi and James Hunt, in the 1980s and 1990s with Niki Lauda, Alain Prost and Ayrton Senna, and in this century with Lewis Hamilton.
The company was a pioneer in carbon fibre technology and Mr Dennis seven years ago branched into luxury sports car manufacturing at the company’s facility in Surrey, United Kingdom, with models ranging from the entry-level Sports Series, which includes the 570S Coupé, retailing at around $190,000, up to the P1 GTR, which can be had for a little north of $4 million.
The company said it sold 3,300 cars last year, with sales revenue up 44 per cent year-on- year at £650m and operating profit up 180 per cent at £66m.
The company has also expanded horizontally through the technologies it developed in car racing, into businesses including solar, financial services software ( in a partnership with auditing and advisory firm KPMG), and biomedical diagnostics (with drug maker GSK).
However, the racing team, upon which the branding success of the company is built, has had a long dry patch since Mr Hamilton left in 2008.
Its three drivers have yet to score points after eight races of the 2017 Formula One season.
“McLaren Racing...is not currently achieving the on-track success in Formula One that we know it is capable of, and that it has achieved in the past, but that will change,” said Mr Ojjeh, who will be McLaren Group's co-executive committee princi- pal with Sheikh Mohammed.
Frenchman Éric Boullier was hired by Mr Dennis as racing director three years ago. Asked in an interview with Formula One’s website earlier this month, after the Monaco Grand Prix, about “approaching a fork in the road” in McLaren’s relationship with Honda, Mr Boullier said: “We have never been so close to that fork. The performance went backwards. We have the support from our executive committee to sort this out because we can't go on like this."
The relationship between McLaren’s majority shareholders and Mr Dennis could also not go on after a bitter battle that ended up in the High Court in London last autumn, a rift that had been precipitated by a personal falling out between Mr Dennis and Mr Ojjeh, as widely reported by Formula 1 watchers.
The 70-year-old Mr Dennis said in his parting statement that he would now focus on charitable and public service interests.
"I wish McLaren well," he said. "They are the best of the best and well funded to succeed and grow, led by an ambitious management team."
Taking full control of McLaren sits well with Mumtalakat’s ownership of the Bahrain International Circuit, whose mid-April race comes third in the Formula One calendar. The Bahrain race has just finished its 13th season and it is one of the biggest tourist draws to the kingdom.
The sovereign wealth fund, which also owns loss-making Gulf Air, reported last month that net profit more than doubled last year to 69m Bahraini dinars (Dh667m), from 29m dinars the year before, with better results in areas such as health care making up for weaker sectors.