With the coronavirus hitting hard around the world, the global luxury car segment is not having the best of times. Luxury British car company, Aston Martin recently announced that their revenue had dropped by 50 per cent in the third quarter of 2020, falling to £124 million compared to a healthy £244 million the year before, 2020.
Now comes good news that Mercedes-Benz will take up to a 20 per cent equity stake in Aston Martin in exchange for becoming one of Aston Martin’s biggest shareholders, Mercedes-Benz will give it access to its car design technologies. Mercedes-Benz already has a 5 per cent stake in this iconic sports car company.
Billionaire car enthusiast and collector Lawrence Stroll who is also the owner of Formula One team Racing Point(formerly called Force India which he rescued from bankruptcy) took a 16.7 per cent stake in Aston Martin early last year and has been trying to revive the fortunes of the brand since then.
Shares in Aston Martin jumped 4.5 per cent prior to the announcement, which came as markets closed yesterday afternoon. Since listing in October 2018 the company has struggled, with plunging revenues weighed down further by the coronavirus pandemic.
PRESS RELEASE: Mercedes-Benz AG and Aston Martin Lagonda Global Holdings plc (“Aston Martin”) have announced a new strategic technology agreement and an enhanced partnership. The new agreement will see Mercedes-Benz AG grant access to a range of advanced Mercedes-Benz technologies, including next generation hybrid and electric powertrains, as well as other vehicle components and systems.
Access to these technologies will be granted in exchange for new shares in Aston Martin, issued in several stages over the next 3 years, up to a total value of GBP 286 million. Mercedes-Benz AG’s current shareholding stands at 2.6% of Aston Martin’s common equity. The new shares to be issued will take Mercedes-Benz AG’s holding up to a maximum of no more than 20.0%. Mercedes-Benz AG has no intention to increase its holding in Aston Martin beyond this level.
Background
In 2013, Mercedes-Benz AG and Aston Martin entered into a strategic cooperation for the supply of AMG V8 enginesand the supply of components for the E/E (electrical) architecture. In return, Mercedes-Benz AG received an equity participation of 5% in Aston Martin. Following Aston Martin’s IPO in 2018 and various further financing rounds, Mercedes-Benz AG now owns a 2.6% stake.
Key terms of the new agreement
During 2020, negotiations regarding the expansion of the existing cooperation were initiated. In a first step, Aston Martin requested access to certain engines and powertrains as well as powertrain software, E/E architecture and various other components. Mercedes-Benz AG has agreed to provide such technology access to Aston Martin in exchange for additional new shares in Aston Martin, which will be allotted to Mercedes-Benz AG by means of a Contribution in Kind (“CiK”). The arrangement will not involve any cash consideration from Mercedes-Benz AG. The supply of the systems and components will be on arm’s length terms.
A total CiK value of GBP 286 million will be required to achieve the maximum agreed shareholding of 20.0% in Aston Martin. Mercedes-Benz AG has no intention to increase its holding beyond this level. The new shares shall be issued to Mercedes-Benz AG in several tranches by 2023, tied to the release of various technology packages.
The main terms and conditions for the first technology package and share tranche have already been agreed. The value for the Tranche 1 technology is GBP 140 million. The shares to be issued to Mercedes-Benz AG in return for Tranche 1 technology will increase Mercedes-Benz AG’s shareholding to 11.8%. For further tranches, the parties need to agree upon the scope of the technology to be made available to Aston Martin, the respective value (“entry fees”) and the piece prices of components and systems.
The planned continuation and enhancement of the cooperation with Aston Martin will result in further sales of components and systems for Mercedes-Benz AG, as well as the potential upside of any increase in the value of the enlarged shareholding in Aston Martin.
