Aston Martin Lagonda has presented a revised investment structure from Lawrence Stroll due to the COVID-19 outbreak.
Due to the COVID-19 breakout, Aston Martin has been forced to take in extra money for its rescue deal as it has been raised from £500m to £536m from Canadian businessmen and Racing Point F1 Team co-owner, Stroll – thereby changing the terms of agreement.
The pandemic has hurt the shares of Aston Martin, even though they have done their best to keep the company afloat with minimum damages. But companies worldwide are facing the heat as stock market hasn’t been pretty good for anyone.
Under the new terms, the consortium of investors led by Stroll will put in £171m into the company at 225p a share for a 25 percent stake in the business, which is lower than its planned investment where they had to spend £182m at 400p a share for a 16.7 percent.
The British car maker – to become a F1 team as well – is to stage a special meeting on March 30 to agree the rights issue. A short-term loan has been increased from £55.5m to £75.5m to help ease the finances of Aston Martin from Stroll.
The existing investors, meanwhile, who were initially asked to buy in at 207p a share, will now pay 30p a share for new equity. At the same time, the amount raised from the rights issue has risen from £318m to £365m which has lowered Stroll’s investment value.
Once Stroll has taken up his rights in the rights issue, he will invest £262m as compared to £305m under the earlier plan. This is a forced situation as the shares of Aston Martin when the deal was signed was close to 500p but it has fallen to around 206p now.
“We are actively managing the potential impacts of Covid-19 on a daily basis, most particularly in our tier 2 supply chain, with no disruption to production to date and are mindful of the ongoing uncertainties and risks to the business,” said Andy Palmer.
“The first two months of the year were planned to be our smallest in wholesale unit terms, as we start to rebalance supply and demand; a key component of our plan to turn around performance and restore our price positioning. Trading has generally been in line with these conservative expectations, with retail performance slightly better than planned.
“In light of the increased uncertainty presented by Covid-19 we are taking actions to safeguard the Company through this extremely volatile period. The third production trial of DBX at St Athan, where we test the facility and our suppliers at run rate and to final customer quality standards, is proceeding as planned.
“We unveiled the Vantage Roadster, a key component of the Vantage relaunch with a digital event last week and development of Aston Martin Valkyrie continues apace and to plan.” At the same time – the to be – Chairman, Stroll added:
“There has been a significant change in the global market environment in which Aston Martin Lagonda operates. What has not changed is our commitment to provide the Company with the necessary funding it needs to manage through this period, to reset the business and to deliver on its long-term potential.
“Following recent moves in the share price and discussions with the Board, I and my consortium of investors, have agreed that we will now acquire 25% of the company and take up our rights in full in return for a long-term capital Investment of £262 million.
“In addition, we have agreed to advance a further £20 million in short term funding to support the company, bringing this total amount to £75.5 million. Whilst the immediate outlook looks increasingly challenging, I remain fully committed to the future of Aston Martin and look forward to implementing our plans once the fundraising is complete.”
It is unclear at this stage if the above changes will bring any difference to the Racing Point situation and the future of the team under Aston Martin F1 Team from 2021 onward. The start of 2020 F1 season, meanwhile, has been postponed due to COVID-19.
Here’s the full statement from Aston Martin:
“In light of recent extraordinary equity market volatility related to concerns over Covid-19, the Company has renegotiated certain terms relating to the proposed investment by the consortium led by Lawrence Stroll (the “Consortium”) and the subsequent rights issue.
These new terms will provide further safeguards to the Company in the short and long term. The spread of Covid-19 is creating significant challenges for many companies. Aston Martin Lagonda continues to manage proactively across its supply chain and business more broadly.
-The primary concern of the Company remains the health and safety of colleagues and their families, business partners and the local communities and the Company continues to provide all the support possible. Public health measures advised by governments are being followed in support of their efforts to contain the spread of the virus.
-Despite disruption to supply of some tier 2 components from China, there has been no impact on production to date. Supply is secured until at least early April and the Company continues to monitor its suppliers and inventory as it seeks to extend this profile to mitigate future potential disruption.
-Covid-19 has negatively impacted economic conditions globally, has impacted customer demand in China and APAC and has potential to do the same in other markets increasing uncertainties and risks to the financial performance of the Company in 2020.
o The Company responded to the cancellation of the Geneva Motor Show with a social media led launch of the Aston Martin Vantage Roadster and the V12 Speedster.
o Concerns about the virus have also led to the cancellation or postponement of events such as some F1 races and the launch of the new James Bond film from April to November.
The first two months of the year were planned conservatively with wholesales expected to be lower year-on-year as the Company focuses on reducing dealer inventories to a luxury norm. Specifically, no wholesales were planned in China for the period. In terms of trading year-to-date:
-Retail sales (dealer sales to customers) were slightly ahead of plan and wholesales (sales to dealers) were in-line with the Company’s expectations and reset objectives;
-Dealer inventories have consequently reduced by c.300 units;
-The DBX order book has continued to build and the Company is now taking retail orders into 2021.
The proposed Capital Raise, which remains subject to shareholder approval (as outlined below), is amended as follows:
-Total Capital Raise is increased by £36 million to £536 million, as an appropriate measure reflecting increased uncertainties since the announcement of 27 February. It is proposed that:
o The Consortium will take a position of approximately 25% of the post-placing issued share capital of the Company for £2.25 per share and follow its rights in full.
o The subsequent proposed committed and underwritten rights issue (the “Rights Issue”) will raise c.£365 million further details of which are announced below.
-Short-term working capital support from Yew Tree, a vehicle controlled by Lawrence Stroll, is increased to £75.5 million to support resilience and immediate liquidity needs given the revised timetable for the Capital Raise.
Full revised terms of the Capital Raise will be disclosed in a supplementary prospectus, expected to be published by the Company later today (the “Supplementary Prospectus”). The Supplementary Prospectus will also include a notice of a new general meeting that will be convened to seek the necessary shareholder approvals for the revised terms of the Capital Raise (the “New General Meeting”).
Although the timetable is conditional on FCA approval of the Supplementary Prospectus, the New General Meeting is currently expected to be on 30 March. Full details on timing will be provided in the Supplementary Prospectus. Following renegotiation of the terms agreed with the Consortium and the revision of the terms of the Capital Raise, the resolutions to be proposed at the general meeting previously convened for 10.00 a.m. on 16 March 2020 (the “16 March General Meeting”) are now redundant.
Accordingly, the Board intends to take the necessary steps to adjourn indefinitely the 16 March General Meeting. Shareholders will therefore not need to attend the 16 March General Meeting, but should instead attend, or submit their vote by proxy (in accordance with the instructions for doing so to be set out in the Supplementary Prospectus) for, the New General Meeting.
The Board believes the measures agreed with Mr Stroll and other large shareholders represent responsible action against a range of possible scenarios given the recent volatility. Details of the Capital Raise:
-Strategic equity investment of £171 million (the “Placing”) by the Consortium
o Through the issue of 76 million new ordinary shares in the capital of the Company at a price of £2.25 per share to the Consortium, representing approximately 25.0% of the post-Placing issued share capital of the Company;
o The provision in the placing agreement that allowed the Consortium to terminate the agreement in the event of a material adverse change in the condition of the Company or the market has been removed from the restated placing agreement to provide further certainty to the Capital Raise.
-Fully underwritten Rights Issue of £365 million supported by Prestige/Strategic European Investment Group (SEIG) and Adeem/Primewagon (the “Major Shareholders”)
o Prestige/Strategic European Investment Group (SEIG) and Adeem/Primewagon who together own c.57.2% of the issued share capital of the Company as at the date of this announcement and who are expected to own c.42.9% following the proposed Placing have irrevocably undertaken to vote in favour of the Placing and the Rights Issue;
o Prestige/SEIG have irrevocably undertaken to take up their rights in the Rights Issue in full as has the Consortium;
o Adeem/Primewagon have irrevocably undertaken to take up 26.5% of their rights in the Rights Issue;
o Mercedes-Benz AG and Torreal Sociedad de Capital Riesgo, S.A. (which was previously part of the Prestige/SEIG shareholder group) which own 4.2% and 3.1% respectively of the issued share capital of the Company as at 9 March 2020 (being the latest practicable date prior to the publication of this announcement) have both irrevocably undertaken to (i) vote in favour of the Placing and the Rights Issue; and (ii) to take up their rights in full;
o The Company has therefore received irrevocable undertakings from shareholders representing 64.5% of the issued share capital of the Company as at the date of this announcement to vote in favour of the Placing and the Rights Issue; those shareholders and the Consortium will hold 73.4% of the post-placing share capital of the Company;
o In aggregate, the Company has received commitments to take up rights representing 58.2% of the entitlements in respect of the Rights Issue. Details of the Rights Issue:
-The Company today announces the details of a four for one fully committed and underwritten Rights Issue of 1,216 million New Shares to raise gross proceeds of approximately £365 million.
-The issue price of 30 pence per New Share represents:
o a discount of 86.0% to the Closing Price on 12 March 2020 (being the last business day prior to the date of this announcement); and
o a 55.1% discount to the theoretical ex-rights price of 67 pence per New Share calculated by reference to the Closing Price on the same basis.
–The Rights Issue, which is subject to shareholder approval, is underwritten by Deutsche Bank, J.P. Morgan Cazenove and Morgan Stanley.
Further details of the Consortium investment in Aston Martin
-As part of the investment from the Consortium:
o In addition to the £55.5 million of short-term working capital support provided in February to support the liquidity of the Company, Yew Tree, a vehicle controlled by Mr. Stroll, has agreed to provide up to a further £20 million during the course of the next few days. Upon settlement of the Placing, it is intended that this £75.5 million will be set off against the proceeds of the Placing, and the Company would still no longer plan to draw the $100 million of Delayed Draw Notes.
Board changes at Aston Martin
-As a result of the amended timetable for the Capital Raise, Lawrence Stroll will now succeed Penny Hughes as Chair on completion of the Rights Issue which is now expected to be 20 April.
-The Board has agreed that the board appointment rights contained in the relationship agreements entered into by the Consortium – as well as for Prestige/SEIG and Adeem/Primewagon – be amended to reduce the threshold at which each shareholder group will have the right to appoint two directors to the Board. This will be for so long as a shareholder group’s holding of voting rights in the Company is equal to or exceeds the lower of 10% and the percentage of voting rights held by Adeem/Primewagon following each of the Placing and the Rights Issue (as applicable), provided such holding is above 7%.
Here’s the initial story around Lawrence Stroll buyout of Aston Martin