McLaren will receive 202 million euros from an American fund
In search of liquidity, McLaren was forced to bring in a new minority shareholder, the New York fund MSP Sports Capital.
The economic crisis brought on by Covid-19 has impacted many industries, starting with professional sports. The delay of the season and the reduced number of events are going to result in a direct decrease in revenue for F1 teams. McLaren has emerged as one of the most vulnerable teams, which has led to the announcement of cutting 1,200 jobs, including in the racing division.
During the summer, the team found salvation only through a loan from the National Bank of Bahrain, as the Middle Eastern kingdom is one of its long-term shareholders. This did not prevent the team from announcing in September that its headquarters in Woking was up for sale to bring in cash.
Now that the season is coming to an end, it’s time to move from emergency solutions to more long-term ones. It is in this context that the team has just announced the entry of MSP Sports Capital, an investment fund, into the capital of McLaren Racing, its competition division involved in F1 and IndyCar. This is a structuring transaction for the team as the fund will now hold 15% of the team in exchange for a payment of 202 million euros. MSP even reserves the right to increase its stake up to 33% by the end of 2022. However, the automobile manufacturing part is not affected by this transaction and will remain the full property of McLaren Group.
It is thus interesting to see that MSP Sports Capital prominently displays on its website its aggressive investment strategy, as it believes that the current period will force sports teams to open their capital at a lower valuation: Many teams will suffer from liquidity issues. New opportunities will arise to invest in teams, leagues, and businesses within the sports business ecosystem at a lower cost. As the global sports industry restarts in the second half of 2020, we will be opportunity buyers, focusing on companies and sellers in need of liquidity. Therefore, we can see that McLaren fits perfectly into this category of companies with strong assets but a vital need for fresh cash inflows.
This change in shareholding will also impact McLaren’s organizational structure, although Zak Brown retains the trust of the new entrants and will keep his position as CEO. However, Paul Walsh will become the chairman of the board of McLaren Racing, while Jahm Najafi, a partner at MSP Sports Capital, will become vice-chairman alongside Sheikh Mohammed Al Khalifa of the Bahraini royal family. Jeff Moorad, founder of MSP, and Rodrigo Trelles Zabala from UBS will join the board, along with the two representatives from McLaren Racing, Sultan Ojjeh (Mansour’s son) and Will Griffiths.
