What does Racing Point’s investment into Aston Martin mean?

It’s now official that Racing Point will become an Aston Martin ‘works’ team from 2021, so what’s the full story behind the investment from Lawrence Stroll?

On Friday, it was announced that a long-rumoured financial link-up between Lawrence Stroll and Aston Martin had finally happened. Documents issued from the London Stock Exchange showed that Stroll’s Racing Point consortium, the one he established along with several other investors, had pumped in some £182 million pounds in order to purchase 16.7% of the struggling Aston Martin company.

Another of Stroll’s investment companies, Yew Tree Overseas, will also pump in £55.5 million pounds in order to provide some short-term money to help Aston through a turbulent period, brought on by poor sales in 2019. Yew Tree will be refunded this money in the short-term future as the companies’ finances improve. Racing Point won’t be majority shareholders in Aston, as current majority shareholders Prestige/Strategic European Investment Group (SEIG) and Adeem/Primewagon will remain so – they’ll continue to hold 50.5% of the company following the asset sale. Between Racing Point, Yew Tree and the existing shareholders, some £500 million pounds has been raised to help the company.

Penny Hughes, former Chairperson at Aston, will step down as a Director, and explained the situation was dire: “The difficult trading performance in 2019 resulted in severe pressure on liquidity which has left the Company with no alternative but to seek substantial additional equity financing. Without this the balance sheet is not robust enough to support the operations of the group. Notwithstanding recent weak trading, the strength of the Aston Martin brand and our expanding portfolio of cars has allowed us to attract a strong new partner in Mr. Stroll to support the turnaround of the business.”

And Stroll has big plans. Off the back of this, it’s now confirmed that Racing Point will become a ‘works’ Aston Martin team from 2021. There will be no ramifications in terms of loss of finances from Formula 1’s commercial branch, as the team entry and ownership will remain the same – similar to the arrangement between Alfa Romeo and Sauber. Also similar to the aforementioned is the sponsorship deal signed between Aston and Racing Point. The intention is for the F1 team to become the Aston works team for ten years, with an initial sponsorship arrangement (ie. naming rights and branding) for five years. This will be renewed for a further five years, provided ‘certain conditions’ are satisfied at the time. Presumably this will be based on sporting performance, resulting in economic improvement for the Aston Martin company.

F1 Formula 1 Racing Point Lawrence Stroll
Leanne Boon/Octane Photographic Ltd.

Stroll and Racing Point have also indicated they intend to increase their shareholding at Aston to a round 20%, although there’s yet to be a timeline announced for this. It may come about at the end of the Red Bull partnership, who have now lost out on the technical partnership they had signed with Aston back in 2016. Aston will continue to sponsor Red Bull Racing for 2020, and continue to work with Red Bull Technologies on their Valkyrie product. The intention is to end this partnership as soon as the Valkyrie project is completed.

With Aston Martin set for a relatively long-term future in Formula 1, the question is how the team will be run. Daimler AG, the parent company of Mercedes, continues to hold 5% shareholding in Aston Martin Lagonda and the existing engine supply agreement between Merc and Aston is almost certain to continue – Mercedes-AMG also supply engines, gearboxes and electronics to the Aston Martin roadcars, including the upcoming DBX SUV which Aston are hoping will start to turn their fortunes around.

Recent rumours have also circulated that Mercedes are eying up a way out of Formula 1 as a constructor, with a meeting discussing this rumoured for February. However, Daimler CEO Ola Kaellenius has denied this is the case. No commercial agreement is in place beyond 2020 for Mercedes (although this is the case for the whole grid), although they have already signed an agreement to continue supplying engines to McLaren and Williams for quite a few years. Should Mercedes decide that team ownership isn’t for them any more, it would leave the new Aston Martin team primed to take over as the lead Merc team, provided Daimler continue to hold onto their portion. There had been some speculation of Stroll investing in the Brackley team if Mercedes choose to sell. That doesn’t appear likely now, at all. If Merc opt to sell up, will Toto Wolff follow suit and sell his shares? His contract as Head of Mercedes Motorsport comes to an end this year as well, meaning there’s a lot of behind the scenes negotiations to be concluded. If Wolff decides to leave and start afresh, might he be tempted to work alongside Stroll and Aston Martin in a team leadership capacity?

F1 Formula 1 Mercedes Toto Wolff Lawrence Stroll
Leanne Boon/Octane Photographic Ltd.

However, the more likely scenario is that Mercedes continue in F1, Wolff stays, and they sign the new Concorde Agreement. This would align the Aston Martin team in a similar situation to Alfa Romeo’s F1 outfit, and would give Mercedes a de facto ‘junior’ team – a customer outfit that has close ownership ties to their manufacturer suppliers, and the political ties that come with such a deal. Commercially, the Aston Martin name should be attractive to sponsors and should help the former Jordan/Spyker/Midland/Force India team attract more funding as they go through a period of upgrading their infrastructure. It’s a win for Formula 1, who now have another prestige manufacturer name on the grid – the first time since 1960 an Aston will grace the grid. The biggest winner of all is Lance Stroll, who is all but assured a seat at the F1 team alongside the long-term agreement signed by Sergio Perez. 

Aston Martin CEO Andy Palmer welcomes all the changes, saying that he has confidence that Stroll can help turn around the fortunes of the company: “As we announced on 7 January 2020, the past year has been a regrettably disappointing and challenging time for the Company. Despite our continued efforts, the difficult trading conditions and resulting poor performance in 2019 has put the Company in a stressed position with severe pressure on liquidity and affected our ability to deliver against our original plan.”

“Today’s fundraising is necessary and provides a platform to support the long-term future of the Company.  Mr. Stroll brings strong and proven expertise in both automotive and luxury brands more widely which we believe will be of significant benefit to Aston Martin Lagonda. Following a comprehensive review, today we announce a series of immediate actions to reset, stabilise and de-risk the business, positioning it for controlled, long-term profitable growth.”

Stroll himself, who appears to have been building towards this moment for several years ever since his name ever came up in relation to purchasing an F1 team, says that his new position on the board of Aston Martin will be a long-term agreement to turn around the company and expand the business: “I am very pleased that I, and my partners in the Consortium, have reached agreement with the Board and major shareholders to make this significant long-term investment. Aston Martin Lagonda makes some of the world’s most iconic luxury cars, designed and built by very talented people. Our investment announced today underpins the Company’s financial security and ensures it will be operating from a position of financial strength.”

“On completion of the £500m of fundraising I look forward to working with the Board and management team in Aston Martin Lagonda to review and improve each aspect of the company’s operations and marketing; to continue to invest in the development of new models and technologies and to start to rebalance production to prioritise demand over supply.”

“I, and my partners, firmly believe that Aston Martin is one of the great global luxury car brands. I believe that this combination of capital and my experience of both the motor industry and building highly successful global brands will mean that, over time, we fulfil Aston Martin Lagonda’s potential.” 

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Thomas Maher

Co-owner, Chief Editor and a journalist for FormulaSpy.com - Ireland's only accredited F1 & Formula E website. Enjoy my work - https://www.buymeacoffee.com/MidcHN8

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