US Investor MSP Sports Capital has taken a 33 per cent stake in the cash-strapped Formula One team McLaren Racing.
"MSP Sports Capital will invest a total of £185 million (US$246 million) into McLaren Racing, acquiring an initial 15 per cent stake that will increase to a maximum of a 33 per cent shareholding by the end of 2022. The transaction values McLaren Racing at UK£560 million (US$745 million), post-money," McLaren Group said in a statement.
Paul Walsh, the new Executive Chair of McLaren, told The Telegraph the deal had been struck to prop up Maclaren Racing’s balance sheet, which has been battered by a collapse in sales caused by the coronavirus pandemic.
"We have tried to support the racing team with cashflow from automotive but that is not a sustainable business model," he told The Telegraph.
"This approach allows us to invest in automotive but also allows us to continue our quest to get to the front of the grid, access third-party capital and bring in expertise."
MSP Sports Capital, which has a range of interests including media rights, distribution technologies, content creation, sponsorship, e-sports, betting and data MSP, is co-investing with its strategic partners UBS O’Connor and The Najafi Companies.
Walsh, formerly the CEO of Diageo, the world's largest spirits group, for 12 years between 2000 and 2013, said the capital injection would free McLaren from financial hardship until a bond refinancing next year.
COVID-19 "exposed and accelerated" problems with the structure of the business, with the loss-making racing team’s Formula One and IndyCar operations "chewing up cashflow while lockdowns meant we weren’t making and selling cars", Walsh told The Telegraph.
McLaren Racing finished third in the 2020 Constructors’ Championship after the final Formula One race of the season, the Abu Dhabi Grand Prix, its best result in eight years.
"We need to continue to make investments and be as prepared as possible going into the cost cap, and now we are able to do that," McLaren Group CEO Zak Brown told a press conference in Abu Dhabi.
"But as Paul said, had we not been in a position to invest, I think we would have had to lower our ambition, which is not the ambition of any of us here, and certainly not for our shareholders.
"But now we have the investment to invest in our people and the technologies we need to keep driving forward."