Mercedes takes 20pc stake in Aston Martin
Mercedes-Benz is to take a 20pc stake in Aston Martin as the embattled sports car manufacturer launches a surprise £1.25bn rescue deal.
The German car maker is to supply Aston with technology such as engines and electric power trains valued at £286m as part of the deal, which also involves bringing in new investors and raising extra debt.
In return, Mercedes' stake in Aston will be gradually built up from the current level of 2.3pc to 20pc.
The deal comes with a safety valve for Mercedes. If Aston's share price drops below Mercedes' entry price, Aston will have to pay cash compensation for the technology.
Analysts said it could open the door to a takeover of one of the UK's last independent car makers if sales continue to struggle.
David Bailey, an automotive industry expert at Birmingham university, said: “Aston is too small to survive on its own and is dependent on Mercedes technology.
“This arrangement gives them 20pc so they don’t have outright control but Aston’s reliance on Mercedes technology gives it control in that respect. At the right price, they could purchase what is a very cool brand.”
Aston has struggled since going public in a £4bn flotation almost two years ago, with its share price collapsing and the company having to raise expensive new debt to survive as sales plunged, driving it into the red. The company is now worth just £1bn.
Chief executive Andy Palmer was ousted in May and his ambitious plans to add new models were shelved after a consortium led by billionaire Formula 1 fan Lawrence Stroll took control. Mr Stroll injected £500m into the firm, making its the largest shareholder.
He also brought in former Mercedes executive Tobias Moers as the new chief executive, hinting at strengthening links between the Aston and the German company. They have worked together since 2013, with Mercedes supplying engines and other technology to Aston.
Announcing the fundraising, Mr Stroll also revealed a new strategy which will introduce hybrid cars in 2023. The firm is targeting sales of 10,000 cars a year by 2024, along with revenues of £2bn and earnings of £500m.
Aston had revenues of £997m at its last annual results, generating a £104m pre-tax loss on sales of 5,862 cars.
The company said that in the first nine months of this year it sold 2,752 cars, generating revenue of £270m and a £308m pre-tax loss.
The fundraising announced on Tuesday includes securing £125m by selling new shares to investors including European family office Zelon Holdings and New York hedge fund Permian Investment Partners.
Mr Stroll is also buying in so that here remains the largest shareholder, just above Mercedes.
Aston is also issuing £840m of new debt. The money coming into the business will be used to repay and refinance Aston’s almost £900m of debt, meaning the net proceeds from the fundraise will be £200m.
Mr Stroll laughed off suggestions Aston’s cars could be built in Mercedes' German factories, saying the company is committed to its plants in Gaydon, Warwickshire, and St Athan, in Wales.
Mr Moers added that the huge expense of developing electric vehicles - which he referred to as “Project Firework” - would be too much for Aston to bear alone.
He said: “There is always a need for small companies to co-operate on electric vehicles, our cashflow would be very different without Mercedes”.
