- Luxury car maker raises £653 million in discounted rights issue
- Saudi pubic investment fund to become major shareholder
- Company rejects rival £1.3 billion rescue deal
In news which surely can’t have surprised anyone who has followed the company’s history, luxury sports car maker Aston Martin Lagonda (AML) has come to the market to raise a whopping £653 million in new equity to keep the wheels turning.
The big surprise is that, with the capital raise equating to more than 1.5 times the company’s equity market capitalisation last night and the new shares being placed at a heavily discounted price of 335p, the market reaction has been to mark the stock up 24% to 460p.
LIVE ANOTHER DAY
Aston Martin says it is raising the cash to ‘meaningfully de-leverage the balance sheet, strengthen and accelerate long-term growth’.
The proposed equity capital raise ‘provides a clear pathway for significant shareholder value creation with pro-forma cash of £500 million to £600 million post debt pay down, driving Aston Martin’s growth ambitions and supporting positive free cash flow generation from 2024’, the firm says.
It also reveals the Saudi Arabian Public Investment Fund will subscribe to the capital raise and will become the second-placed shareholder, behind Yew Tree which will own 18.3% of the company and ahead of German auto giant Mercedes-Benz which will own a 9.7% stake.
How the involvement of the Saudi government will sit with investors who pay attention to ESG criteria including human rights remains to be seen, but from the stock price reaction it seems the market is breathing a huge sigh of relief the 109 year-old firm isn’t filing for bankruptcy for the eight time.
FOR THEIR EYES ONLY
In another unexpected turn, the company revealed it had rejected a proposal from a consortium consisting of former core shareholder Investindustrial group and Chinese auto maker Geely International for an equity investment of up to £1.3 billion.
The Italian private equity firm, which initially paid €190 million for a 37.5% stake in the UK car maker in 2012, sold part of its stake in the 2018 initial public offering at £19 per share and finally exited its investment in 2020.
The board of Aston Martin rejected the offer without consulting retail investors, saying it ‘markedly overestimated the company’s new equity capital requirements, would have been heavily dilutive for existing shareholders, and comprised a number of execution obstacles’.
It also called the offer ‘an attempt by the consortium to acquire a controlling and prospectively majority ownership position without any premium paid to existing shareholders’.
GOOD SIGN
On current trading, the firm said its GT and sports car range was fully sold out into 2023 and order intake for its DBX model was up 40% on this time last year although supply chain issues had impacted deliveries in the second quarter.
Initial deliveries of the fully sold out Vantage V12 began last quarter along with deliveries of the Valkyrie ‘hypercar’.
First half cash flow and cash on hand was impacted by ‘elevated working capital outflows related to supply chain and logistics disruptions, as well as movements in the level of usage of the revolving credit facility at the end of the period’.
Nevertheless, the firm said it hoped to trade in line with its full year expectations and reiterated its guidance for unit sales and operating margins.
