Aston Martin Lagonda has announced Mercedes is to own up to fifth of its shares in a bid to turn around its fortunes.
The iconic luxury British sports car manufacturer said it was to expand the investment partnership between the pair through greater access to the German company’s hybrid and electric technology in exchange for a shareholding of up to 20% and a seat on its board.
Aston Martin has had a hard time since a 2018 flotation as sales struggles forced it to seek new investment and resulted in Chief Executive, Andy Palmer being replaced by CEO of Mercedes-AMG, Tobias Moers, as the coronavirus crisis added to its problems.
The announced deal will see Mercedes gradually increase its stake through the creation of new shares.
Aston added that the deal will serve as a foundation of an updated turnaround plan which aims to deliver annual sales of 10,000 vehicles by 2024/25 and revenues of £2bn. The car company made sales of almost 6000 cars in 2019.
The car manufacturing company will also receive a £125m investment in new shares from Zelon Holdings, the investment office of an unnamed European family and the hedge fund, Permian Investment Partners.
The largest part of the package involves the issuance of £1.2bn in new debt which will refinance Aston Martin’s existing borrowing and ultimately give it £200m in new funds, taking its total cash pile to more than £500m.
Aston Martin reported an adjusted loss of £29m for the third quarter compared with profits of £43m for the same period in 2019 as revenues almost halved to £124m.
It also revealed a proposed financing of £125m through the sale of new shares to further bolster its balance sheet alongside a bond issue that aimed to raise £840m.
Aston’s executive chairman, Canadian billionaire Lawrence Stroll, has also made investments that will see Aston Martin become a works Formula One team in the 2021 season through a rebrand of his Racing Point outfit.
Speaking on the partnership with Mercedes, he said, “This is a transformational moment for Aston Martin. It is the result of six months of enormous effort to position the company for success to capture the huge and exciting opportunity ahead of us.
“In those six months, since I became executive chairman, we have made significant progress.
“We have appointed a world-class leadership team with deep experience of this industry. We have aggressively and successfully de-stocked the dealer network to rebalance supply to demand.
“We have strengthened the financial resilience of the business and have taken decisive action on costs.
“We have also very successfully launched the DBX. I am extremely pleased with the progress to date and that we are ahead of plan on timing, despite operating in these most challenging of times.”
Wolf-Dieter Kurz, head of product strategy at Mercedes-Benz Cars, added, “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.”