LONDON (Reuters) – US investment group MSP Sports Capital is taking a significant minority stake in McLaren Racing in a deal that Formula 1 team said would give them the tools to return to the forefront of the sport.
FILE PHOTO: Formula 1 F1 – Sakhir Grand Prix – Bahrain International Circuit, Sakhir, Bahrain – December 6, 2020 McLaren’s Carlos Sainz Jr. in action during the racing pool via REUTERS / Kamran Jebreili
The long-term investment announced on Sunday provides for an initial stake of 15%, which should increase to a maximum of 33% by the end of 2022. McLaren said it valued the UK racing team at £ 560 million ($ 740.5 million).
Under the deal, MSP will invest £ 185 million in the former world champion who last won a race in 2012 but is still historically the second most successful team in the sport over a two-year period.
The luxury sports car maker McLaren Automotive remains wholly owned by the McLaren Group, whose majority shareholder is Mumtalakat Holding in Bahrain, and is not part of the transaction.
Members of the consortium include The Najafi Companies, a private investment firm, and UBS O’Connor, a hedge fund subsidiary of the Swiss investment bank UBS.
MSP is headquartered in New York, and the directors have a background as owner and investor in Major League Baseball and the National Basketball Association (NBA), among others.
Jahm Najafi will become vice chairman of McLaren Racing, while Jeff Moorad of MSP and Rodrigo Trelles Zabala of UBS O’Connor will join the McLaren Racing board of directors.
McLaren Racing boss Zak Brown said the investment marks the beginning of the “next chapter” and will allow the team to “recharge” its efforts.
Paul Walsh, executive chairman of McLaren Group, said in a videoconference that the new cash flow would not have a direct impact on McLaren’s debt levels.
“We have a number of activities going on that will try to refinance some of our debt over the next year and with that there could very well be some kind of equity increase,” he said.
“This (deal) means that McLaren Group will not fund racing on a barbeque basis.”
The arrival of MSP increases North American interest in a sport whose commercial rights are held by US-based Liberty Media.
Moorad, a former NASCAR team owner, said MSP was considering acquiring Force India when that team, now Racing Point and owned by Canadian billionaire Lawrence Stroll, went into administration in 2018.
They also thought of former Champions Williams, whose sale to US-based Dorilton Capital was announced in August.
Moorad said McLaren, who will switch from Renault to Mercedes engines with Australian Daniel Ricciardo next season, will be “by far” the first choice.
Najafi said Liberty’s responsibility for the sport, with the introduction of a budget cap next year and big changes in 2022 to improve the playing field and put Formula 1 on a more sustainable footing, built investor confidence.
“We believe Liberty’s business plan to create more franchise-like value for the teams will result in part from the cost cap,” said Moorad.
“All of these parts of a well-designed business plan will ultimately create franchise value for each of the teams in this sport. That’s our bet, to be honest. We’re betting on the long-term future of Formula 1. “($ 1 = 0.7563 pounds)
Reporting by Alan Baldwin, editing by Gareth Jones, Raissa Kasolowsky and Hugh Lawson
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