Aston Martin rallies on rescue deal

Aston Margin Lagonda shares rallied on Friday after it said that a consortium led by Canadian billionaire Lawrence Stroll will inject £182m into the company in return for a 16.7% stake.

The consortium will look to up its holding to 20%, Aston Martin said.

Yew Tree, a vehicle controlled by Stroll - who part-owns the Racing Point Formula 1 team - has agreed to provide £55.5m of short-term working capital support.

As part of the deal, Stroll will join the board and become executive chairman, with current chairman Penny Hughes stepping down. Stroll's Racing Point F1 team will be rebranded as the Aston Martin F1 works team from the 2021 season.

In addition, the luxury car maker said it will launch a £318m rights issue at £4 per share after the release of its 2019 preliminary results.

Aston Martin said net proceeds from the placing and rights issue will be used to improve liquidity and finance the ramp-up in production of the DBX and the turnaround of its performance.

Penny Hughes said: "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."

The company said it continued to expected adjusted earnings before interest, tax, depreciation and amortisation for FY2019 of between £130m and £140m.

At 0900 GMT, the shares were up 27% at 510p.

Neil Wilson, chief market analyst at Markets.com, said: "Aston Martin has found its white knight in the shape of Lawrence Stroll. After months of speculation, he’s come good."

He also pointed to the fact that Stroll will provide £55.5m of short-term working capital.

"This is a vital cash injection - but will it be enough? It will do a lot to alleviate immediate cash flow concerns - not least the fact that earlier this month it reported net debt and leverage ranges of £875m-£885m and 6.2-6.8x respectively.

"However, Aston could well have to go cap in hand to investors again if the sales of its DBX don’t take off. Planned launches of electric vehicles are going to be delayed - they will require a lot of investment and it risks falling behind peers in this space at a critical juncture of EV take-off.

"As we noted earlier this month, something had to be done and Mr Stroll appeared the most likely candidate."

Russ Mould, investment director at AJ Bell, said: "The news that Canadian billionaire Lawrence Stroll will acquire a big stake in the business, which in combination with a rights issue will give the company a £500m lifeline, is a reminder that the Aston Martin brand still has some value.

"Stroll is planning to use the Aston Martin name, with all its James Bond cachet, for his F1 team. This element of the transaction also implies a long-term commitment to the business.

"Having been no stranger to bankruptcy during its 106-year history, the company’s board will have been fully aware of the stakes following a disastrous 2019 which made a mockery of the company’s £4bn valuation at IPO.

"Having secured some breathing space the firm will look to address its problems by limiting production to prioritise demand over supply and support prices, fully launching its SUV model DBX and slashing costs.

"Under the circumstances the departure of chair Penny Hughes was inevitable, with Stroll becoming executive chairman as a condition of his investment. Focus is now likely to fall on CEO Andy Palmer and whether he is the right man to have behind the wheel as Aston Martin looks to find another gear.

"The company itself acknowledges it will not be fully compliant with the UK Corporate Governance Code due to the composition of its board in the wake of today’s developments and it may come under increasing pressure on this issue over time.”