McLaren Sells Up to 33% in Racing Unit to U.S. Investors

McLaren has agreed to sell as much as 33% in its racing unit to a consortium of U.S.-based investors as the company looks to fund the division and fix its finances.

The group led by MSP Sports Capital will invest 185 million pounds ($245 million) in McLaren Racing to acquire an initial 15% stake, which will rise to a maximum of 33% by the end of 2022, McLaren said in a statement. The transaction would value the racing unit at 560 million pounds, the company said.

McLaren needs to refinance bonds due in 2022 and repair its finances to continue developing models that will allow it to compete with the likes of Ferrari NV. The closely held company has previously said it’s considering a sale of its headquarters in Woking, near London, and is reviewing options for its division that manufactures parts for Formula One racing teams and does contract work for other third parties.

“The cash will immediately go into racing so they can fund the operations,” Paul Walsh, executive chairman of the McLaren Group, said in a phone interview. “This is a very good transaction that will benefit the whole group.”

McLaren probably needs to raise about 130 million pounds to boost liquidity to levels in line with its peers, Joel Levington, a Bloomberg Intelligence credit analyst, said in a report Thursday.

“McLaren’s use of financial leverage is very aggressive, given its history of negative cash generation and niche positions within highly cyclical and capital-intensive markets,” Levington said.

A 300 million-pound equity boost early this year proved insufficient when revenue collapsed as the coronavirus forced companies to shutter factories and dealerships.

The pandemic hasn’t hit the racing division very hard, said Walsh, who has been working on the stake sale to the American investors since about June.

“I would have made this decision irrespective of the pandemic,” Walsh said.

©2020 Bloomberg L.P.

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