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Aston Martin Lagonda Global Holdings PLC gets closer to Mercedes through new tie-up

The UK luxury car group also undertook its third equity funding round this year with investors stumping up a further £125mln

(LONAML) is set to be 20% owned by German Group Mercedes-Benz after a strategic agreement between the two was unveiled last night.

The cash-strapped UK luxury car group also undertook its third equity funding round this year with investors stumping up a further £125mln at 50p a share.

In addition, Aston Martin is raising £840mln through a bond offering to redeem existing debt and provide working capital.

The agreement with Mercedes will see the division up its current 5% stake in stages and make available its powertrain architecture and electric vehicle technology for all Aston product launches until 2027.

In return, Mercedes will have the right to appoint a non-executive director to the board.

Tobias Moers, Aston Martin’s chief executive and who joined from Mercedes, said: “Today’s expansion of our partnership with Mercedes-Benz AG is a critical step towards achieving our goals for Aston Martin.

“The capabilities of Mercedes-Benz AG technology will be fundamental to ensure our future products remain competitive and will allow us to invest efficiently in the areas that truly differentiate our products.”

Wolf-Dieter Kurz, Head of Product Strategy at Mercedes-Benz Cars added: “We already have a successful technology partnership in place with Aston Martin that has benefited both companies.

“With this new expanded partnership, we will be able to provide Aston Martin with access to new cutting-edge powertrain and software technologies and components, including next-generation hybrid and electric drive systems.”

In a trading update that accompanied the Mercedes deal, Aston Martin reported that third-quarter revenues to end September were £124mln and underlying losses {LBITDA} £29mln.

Cash at the end of the period was £307mln and net debt £869mln.

Moers said the aim going forward is to get production up to about 10,000 vehicles a year, which would generate revenue of about £2bn and underlying profits of £500mln by end 2025.

Last year, the company sold close to 5,900, generating around £1bn in revenue and underlying profits of £134mln.

Key to its fortunes going forward will be the new DBX sports utility vehicle (SUV).

Ramping up of production of the DBX sports was now complete it said, with the St Athan factory running at the full rate.

Aston Martin has shed early 90% of its value since it floated two years ago and had to be rescued earlier this year by a consortium led by Canadian billionaire and Formula One team owner Lawrence Stroll.

Stroll’s Racing Point F1 team is to be renamed Aston Martin.

Analysts said that with the backing of Mercedes and its engineering capability – it has powered Lewis Hamilton to six consecutive F1 world championships – a recovery in its fortunes is possible.

Citi added that the net result of the debt and equity raises will also leave Aston Martin  left with pro-forma cash of more than £500mln  and push out any refinancing need to 2025.

Shares rose 6.7% to 58.15p.

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2020-10-28 06:46:00

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