- Geely to spend a total of £234 million
- Becomes third-largest investor
- Shares the biggest gainer in FTSE 250
Investors in luxury carmaker Aston Martin Lagonda (AML) are well used to dramatic moves in the company’s share price by now, but even by their standards today’s opening gain was special.
News that Chinese carmaker Geely Automobile (0175:HKG) would inject £95 million into the firm as well as buying enough shares to make it the third-biggest investor sent the stock up 25% to 288p in early dealing, while by midday they had settled up 14% at 264p.
WHY IS GEELY INCREASING ITS STAKE?
Geely has tried to buy Aston Martin Lagonda twice in the past, making bids for the company in 2020 and in 2022, and is paying 335p for new shares, a hefty premium to the closing price of 231p.
Eric Li, the chairman of Geely Holding Group, commented: ‘Our decision to increase our shareholding in Aston Martin reflects our confidence in the company's growth prospects, its technologies and its management team.
‘Since first acquiring our minority holding last September, we have worked collaboratively with executive chairman Lawrence Stroll and his colleagues and now look forward to exploring joint technology synergies and new growth opportunities to help this iconic automotive brand achieve its full potential.’
By more than doubling its stake in Aston Martin Lagonda from 7.6% to 17%, Geely becomes the third-largest shareholder and increases its footprint in Europe where it already controls the UK’s Lotus brand and Volvo Cars.
It is also the main shareholder in US-listed Polestar (PSNY:NASDAQ), essentially Volvo’s EV (electric vehicle) arm, whose vehicles are rapidly growing in popularity in Europe and the US, and there are potential synergies between Aston Martin, Lotus and Polestar.
LONG-TERM PARTNERSHIP
Aston Martin Lagonda chairman Lawrence Stroll commented: ‘Geely sees tremendous potential for Aston Martin's long-term growth and success.
‘They offer us a deep understanding of the key strategic growth market that China represents, as well as the opportunity to access their range of technologies and components.
‘This transaction enables the creation of a long-term partnership with Geely - a relationship that I believe will bring very significant value for all of our shareholders over time.’
The Chinese company has agreed not to increase its holding above 22% until August 2024, but having already tried to buy the business outright in the past it seems unlikely it will stop there.
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