McLaren sells 33% stake in its racing unit

A group led by MSP Sports Capital will invest £185m in McLaren Racing

McLaren McLaren probably needs to raise about £130m to boost liquidity to levels in line with its peers. Sarah Dea / The National

McLaren has agreed to sell as much as 33 per cent in its racing unit to a consortium of US-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 ($245m) in McLaren Racing to acquire an initial 15 per cent stake, which will rise to a maximum of 33 per cent by the end of 2022, McLaren said in a statement. The transaction would value the racing unit at £560m, 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. The closely-held company has previously said it is 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 £130m to boost liquidity to levels in line with its peers, Joel Levington, a Bloomberg Intelligence credit analyst, said in a report on 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,” Mr Levington said.

A £300m 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 Mr 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,” Mr Walsh said.