Aston Martin Lagonda has received a large investment from Saudi Arabia as part of raising £650m of capital to pay down the luxury sportscar maker’s large debts.
The British manufacturer has not been able to generate the cash needed to invest in new models and electric technology, and has also struggled with delays to its Valkyrie hypercar and its newest DBX 707 sports utility vehicle.
The Saudi Public Investment Fund (PIF), led by the crown prince, Mohammed bin Salman, will buy shares worth £78m and take part in a £575m rights issue that will leave it the second-largest investor after Yew Tree, the consortium led by billionaire fashion mogul Lawrence Stroll that took over Aston Martin in early 2020 as it approached bankruptcy.
Shares in Aston Martin hit a record low below 355p on Friday after the deal was announced, before recovering some of this week’s losses to jump 20% to 445p. Its stock market value had slumped from £1.6bn at the start of the year to only £432m on Thursday evening, amid persistent concerns from investors over its financial health.
Bin Salman, Saudi Arabia’s de facto leader, is chairman of the PIF. He has been blamed by US intelligence services for the 2018 murder of the Washington Post journalist Jamal Khashoggi. The murder shocked the international community and caused a crisis in diplomatic relations for the kingdom.
When asked about the suitability of the Saudi regime to invest in a British public company, Stroll, who serves as executive chairman, insisted he was “very comfortable” bringing the PIF on board, citing investments it holds in other “blue-chip” companies and carmakers, such as the Lucid electric startup and rival UK sports car maker McLaren.
The fundraising will represent yet another effort by Aston Martin to put itself on a stable footing after years of struggles as a FTSE 250 listed company. In May, Stroll appointed the former Ferrari boss Amedeo Felisa as its third chief executive in three years to try to revive its image as a maker of exclusive sportscars, favoured by James Bond in the spy film franchise.
The carmaker will use as much as half the new capital to pay down debt, which costs it £130m a year in interest.
The rest of the capital will give the carmaker a “substantial liquidity cushion to underpin and accelerate future capital expenditure”, amid what it described as a “challenging operating environment, impacted by the war in Ukraine, Covid-19 lockdowns in China, as well as continued supply chain and logistics disruptions”. Sales in the first half of the year were down by 8% compared with 2021, to 2,676, because of the problems but it said it expected things to improve in the second half of the year.
Yew Tree’s shareholding will drop from 22% to 18.3% and the PIF will be entitled to two seats on Aston Martin’s board. The existing shareholder Mercedes-Benz will also invest £56m.
The carmaker also turned down a much larger £1.3bn investment offered by a consortium of the Chinese carmaker Geely, which also owns the UK’s Lotus, Sweden’s Volvo and the former Aston Martin owner InvestIndustrial, which has been criticised by former Aston Martin chief executive Andy Palmer for not allowing the carmaker to raise cash in the disastrous stock market listing in 2018.
Stroll criticised the offer as a “camouflaged, in disguise takeover … on the cheap” that would have provided much more money than the company needed. Geely did not offer to help with electric car technology as part of the deal, he said.
Stroll did not rule out working with other companies in the PIF’s portfolio as it prepares to launch its first pure battery car by 2025, but said the fundraising was mainly necessary to address “legacy issues”.
“I inherited a business that was in deep trouble and needed to be completely reset,” said Stroll, adding that while the deal would remove a “significant overhang” from the business, it had been held back by harsh borrowing conditions he agreed on in November 2020.
“The one regret I have is the punitive terms of that financing,” he told reporters. “We had to live with that financing since.”
