It’s a good thing Aston Martin Lagonda makes a four-door model these days. Otherwise, how can the group of major shareholders be accommodated: the Canadian billionaire Lawrence Stroll, the Chinese Geely, the Public Investment Fund of Saudi Arabia, and the German Mercedes. Together, they own about two-thirds.
The Anti-Money Laundering (AML) has been bleeding money for more than three years after a £500m bailout by the Stroll’s Yew Tree consortium. At the moment, he is leading the AML strategy with 21 percent of the group. But, in reality, only his passengers can afford to keep this athlete on the road.
Jelly wants to get her hands on the wheel. The carmaker, which not only controls Volvo Cars but also owns a tenth of Mercedes cars, this week paid £234m to double its stake in AML to 17 per cent. Led by billionaire Eric Lee, Geely is keen to put the Aston brand in a portfolio of cars with marques such as Volvo’s high-end electric car maker Polestar and Lotus sports cars. Geely can raise its share to 22 per cent before August next year.
Picnic may need to date that added stock. Owning a sports car maker, like a premier football club, requires big pockets. AML has drained at least £300m of cash flow (and two CEOs) since Stroll’s bailout. It should erode through £300m to £400m of negative free cash flow this year, according to S&P Global Ratings.
Perhaps it should come as no surprise that the yew tree takes some money off the table. The consortium is the source of 60 percent of Geely’s additional shares. Only around £95m is new equity to support the AML balance sheet. At the end of March this included £868m of net debt, just over twice the expected interest, tax and depreciation indebtedness. This leverage costs more than 10 percent annually. For a low-volume business that relies on every high-priced sale, that debt keeps AML’s growth prospects in check.
Geely paid £3.35 for its shares and the market price remained a fifth below that. Even with some dilution, the market is clearly having its doubts. Expect the creeping Geely acquisition to roll over.
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