£500m deal will turbocharge Aston Martin, says billionaire
By Ben Marlow
and Tim Kiek THE billionaire behind a dramatic rescue of Aston Martin has claimed a £500m cash injection will enable it to pull out of a financial spin and turbocharge production.
Formula One tycoon Lawrence Stroll dismissed questions about the logic of pumping £200m into a company that has been beset by financial problems since joining the stock market 15 months ago.
Mr Stroll, who will become executive chairman of Aston Martin with a 20pc stake, said the company was “a beautiful jewel” in need of a polish. Although it was “no secret” that he is a great car enthusiast, he said: “I only look at things as a business opportunity.”
He owns one of the most valuable Ferrari collections on the planet and the Racing
Point F1 team. The cash injection, alongside other wealthy backers including JCB founder Lord Bamford, is a “really long-term investment”, the Canadian said.
The troubled carmaker plans to raise £500m to restore its battered finances. Mr Stroll’s consortium is putting up £182m and a further £318m is expected to come from existing shareholders through a rights is- sue. Aston’s shares surged nearly a quarter to 496p in noon trade on the news.
Mr Stroll has also agreed a 10-year deal that will see Aston Martin gatecrash the lucrative world of F1, replacing his Racing Point team on the starting grid. The agreement would be “a game-changer” on the marketing and technical front, he claimed.
Mr Stroll predicted that the company could be making as many as 15,000 cars annually within five years, nearly treble last year’s figure. Andy Palmer will remain chief executive as Aston prepares to launch its DBX SUV later this year.
However, Aston Martin will delay development of new electric models until 2025, slow supply of cars to dealers and seek cost savings.
They must be pinching themselves at the Aston Martin dream factory. Just when the troubled carmaker was about to run out of fuel, here comes Formula One billionaire Lawrence Stroll and his mates with the mother of all roadside rescues.
Canadian Stroll and friends, including avid Brexiteer Lord Bamford of JCB fame, are pumping in a whopping £182m in return for a 20pc stake, and a further £318m is being raised from shareholders, taking the total cash injection to £500m.
The carmaker has also been handed a 10-year deal to enter Formula One from next year, with Stroll’s Racing Point team rebranded as Aston Martin.
And boy, was the cash injection needed. Chairman Penny Hughes said there was “severe pressure on liquidity” leaving it with “no alternative but to seek substantial additional financing”. Without emergency funds, “the balance sheet is not robust enough to support the operations of the group”.
So there you have it: Aston Martin would have gone bust without Stroll’s last-minute intervention. No wonder the shares went through the roof, soaring nearly 30pc at one point to more than 500p, the highest level since September.
With new funding coming in, it means there will be no need to draw down a $100m (£76m) loan that came with a nosebleed-inducing 15pc interest rate. As part of the deal, Hughes finds herself in the ejector seat and the tycoon will take over as executive chairman – which may not bode well for boss Andy Palmer, either. Palmer is staying, but with shareholders insisting Stroll takes a more hands-on role, one wonders if the chief executive should be digging out his crash helmet, too.
The current strategy has been torn up. Stroll’s is very different. The big problem at Aston Martin was that it consistently over-egged demand, which meant it produced roughly 1,500 cars too many last year.
Get the supply right and costs should come down quickly – at least, that’s the thinking. Still, that’s one heck of an overrun for a business that sold about 5,000 vehicles in 2019.
How did it get the numbers so wrong? Financial duress caused by failing to raise any new money at the listing, an oversight that now looks utterly reckless given the shortfall management has had to own up to.
Stroll insists the F1 deal is a “gamechanger” that will boost technical know-how and act as a great marketing tool, wooing hundreds of VIP clients to races every year.
Investment in electrification is being delayed amid scepticism about demand for greener fuels, but he is sticking with the new DBX SUV model.
Stroll thinks the focus should be on building a “full complement” of models. Achieve that and Aston Martin has the potential to make between 12,000 and 15,000 models a year, he thinks; almost treble current production, if the top end of that forecast is achieved.
Stroll’s credentials are impressive. He has previously backed big fashion brands such as Pierre Cardin, Ralph Lauren and Tommy Hilfiger, and is estimated to be worth $2.6bn.
Nonetheless, you wonder if the exhaust fumes have got to him when he talks about Aston Martin being a jewel that just needs a “polish”. It will surely take more than that.
‘No wonder the shares went through the roof, soaring nearly 30pc at one point’