Aston Martin Lagonda (AML) is raising £653mn in new funding in a deal which gives Saudi Arabia’s Public Investment Fund a significant stake in the company.
The company sold a 16.7 per cent stake to the Saudi sovereign wealth fund for £3.35 per share, a discount of around 10 per cent to its closing price of £3.71 on Thursday.
The placing is conditional on the company raising a further £575mn through a rights issue, to which PIF, Mercedes-Benz and chair Lawrence Stroll’s Yew Tree Consortium have all agreed to subscribe.
The company said that up to half of the proceeds will be used to pay down its substantial debt pile, which stood at £957mn at the end of March. It is paying interest rates above 10 per cent on more than $1bn (£845mn) of bonds and its total financing costs last year were almost £174mn. The company declared a loss of £214mn on revenue of £1.1bn for the year.
AML rejected an alternative proposal from former backer InvestIndustrial and Chinese car maker Geely, which had offered an equity investment of up to £1.3bn – £203mn of which would have been raised through a placing and £1.1bn from a rights issue. The company said this overstated its funding requirements and would have been “heavily dilutive for existing shareholders”.
Stroll described the deal agreed with PIF and Mercedes-Benz as “a game changing event for Aston Martin”, which would transform its balance sheet and liquidity profile.
The company said the cash would allow it to focus on a new generation of cars, extending the DBX range and developing an electric platform for future sports cars and SUVs. It reiterated medium-term targets of making an adjusted cash profit of £500mn on revenue of £2bn by 2024-25.
Aston Martin’s shares jumped by 14 per cent but are still down 68 per cent year-to-date. Although this funding gives new boss Amedeo Felisa more road to get back up to speed, after doubling first quarter losses to £112mn the company needs to at least show signs it is at least heading in the right direction before we change our sell recommendation.
