Saudi Arabia’s sovereign wealth fund is in advanced talks to acquire a stake in McLaren Group as part of a fresh shake-up at the British supercar manufacturer and Formula One (F1) team-owner.
Sky News has learnt that the Saudi Public Investment Fund (PIF) is to participate in a £550m equity-raise which could be unveiled by McLaren within days.
Banking sources said the deal would include £400m of new capital from PIF and Ares Management, a major global investment firm, with £150m being injected into the company by McLaren’s existing shareholders – who include Mumtalakat, the sovereign investment fund of Bahrain.
The equity-raise was still being finalised on Friday and could still be delayed, the sources cautioned.
If completed, however, it would represent a major vote of confidence in McLaren’s strategy under the leadership of Paul Walsh, the former Diageo chief who joined last year as executive chairman.
The Woking-based company endured a torrid start to the pandemic as it sought a government loan to shore up its balance sheet.
It was also forced into a restructuring of its workforce which saw hundreds of jobs axed.
Sales of its luxury road-cars have, however, rebounded strongly in recent months, while its racing fortunes have also continued to recover.
The Saudis’ acquisition of a minority stake in McLaren Group could pave the way for a series of commercial tie-ups involving the company and the oil-rich Gulf state, one analyst suggested on Thursday evening.
The PIF has also been part of a consortium attempting to buy Newcastle United Football Club from the retail tycoon Mike Ashley – a role which has attracted intense scrutiny from the Premier League and triggered a formal arbitration process that is expected to be resolved this month.
The Saudi fund has been a big investor in technology companies, in part through the giant Vision Fund led by Japan’s SoftBank, and also through individual companies such as the electric vehicle start-up Lucid Motors, which it listed in New York earlier this year.
Its experience with Lucid could be of benefit to McLaren as it develops more hybrid and electric cars such as its Artura model.
Ares Management is regarded as a blue-chip provider of capital to companies around the world, and has an existing relationship with McLaren, according to insiders.
The equity-raise will allay any lingering questions about the strength of McLaren’s balance sheet and will take the total funding raised by the group since Mr Walsh’s arrival to well over £1bn.
That figure comprises a £300m equity injection in March 2020, a £170m sale-and-leaseback of its spectacular Surrey headquarters and a £185m windfall from the sale of a separate stake in McLaren Racing.
McLaren also secured a £150m loan from the National Bank of Bahrain, reflecting its close ties to the Gulf state, last year.
The sale of a stake in McLaren Racing, which comprises its F1 team and INDYCAR Championship outfit, came during a revival in its on-track fortunes after years in the doldrums.
Lando Norris, one of its F1 drivers, sits in fourth place in the drivers’ championship, with team-mate Daniel Ricciardo lying in eighth.
The team, which is overseen by McLaren Racing chief executive Zak Brown, occupies third spot in the constructors’ championship behind Red Bull and Mercedes.
As well as its racing arm, the group consists of McLaren Automotive, which makes luxury road cars and which was highly profitable prior to the COVID-19 crisis; and McLaren Applied Technologies, which generates revenue from sales to corporate customers.
Founded in 1963 by Bruce McLaren, the car marque is one of the most famous names in British motorsport.
During half a century of competing in F1, it has won the constructors’ championship eight times, while its drivers have included the likes of Mika Hakkinen, Lewis Hamilton, Alain Prost and Ayrton Senna.
In total, the team has won 180 Grands Prix, three Indianopolis 500s and the Le Mans 24 Hours on its debut.
This weekend, it will compete in the British Grand Prix at Silverstone.
McLaren’s on-track operations account for roughly 20% of the group’s annual revenues.
It has sponsorship deals with companies including Darktrace, the cybersecurity software provider, Dell Technologies, the computing giant, and – as of this week – Stanley Black & Decker, the tool manufacturer.
McLaren is a major British exporter, directly employing about 3000 people and supporting thousands of jobs across the UK supply chain.
The company saw its separate divisions reunited following the departure in 2017 of Ron Dennis, the veteran McLaren boss who had steered its F1 team through the most successful period in its history.
He became one of Britain’s best-known businessmen, expanding McLaren’s technology ventures into a wide range of other industries through lucrative commercial partnerships.
Mr Dennis offloaded his stake in a £275m deal following a bitter dispute with fellow shareholders.
He had presented to McLaren’s board a £1.65bn takeover bid from a consortium of Chinese investors, but did not attract support for it from boardroom colleagues.
HSBC and Goldman Sachs are advising on the latest equity-raise.
McLaren did not respond to a request for comment on Friday morning.
Food and fashion push retail inflation towards ‘two-year low’
The annual rate of shop price inflation has eased to its lowest level for almost two years, according to an industry reading that credits food and fashion prices.
The British Retail Consortium (BRC)-Nielsen Shop Price Index showed the pace of price increases slowed to 2.5% over the 12 months to February from 2.9% the previous month.
It was the lowest reading since March 2022, the BRC said.
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It was driven by a significant contribution from food, with prices 5% up on a year ago compared with the 6.1% figure registered at the end of January.
The report pointed to price drops for meat, fish and fruit helping fresh food inflation down to 3.4% from an annual rate of 4.9% just four weeks ago.
The BRC credited easing input costs for energy and fertiliser and “fierce” competition for cash-strapped shoppers among retailers.
A separate report by Kantar Worldpanel, which logs supermarket price and sales data, also pointed to an easing in grocery price inflation but it believed food shoppers would be spared a big acceleration in prices ahead.
Its strategic insight director, Tom Steel, said: “Though there’s been lots of discussion about the impact the Red Sea shipping crisis might have on the cost of goods, supermarkets have been pulling out all the stops to keep prices down and help people manage their budgets.
“This month, Morrison’s became the latest retailer to launch a price match scheme with Aldi and Lidl, after Asda made the move in January.
“More generally, we saw promotions accelerate this month after a post-Christmas slowdown. Consumers’ spending on offers increased by 4% in February, worth £586m more than the same month in 2023.”
The BRC pointed out rising costs for things like furniture and electrical goods but extended offers on fashion, to entice spending by customers, during February.
It saw risks ahead to slowing price growth from a series of issues including disruption to shipping in the Red Sea to minimum wage and business rates hikes planned for April.
Helen Dickinson, the BRC’s chief executive, said: “Easing supply chain pressures have begun to feed through to food prices, but significant uncertainties remain as geopolitical tensions rise.
“Prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports around the Cape of Good Hope.
“Domestically, retailers face a major rise to their business rates bills in April, determined by last September’s sky-high inflation rate.
“April’s rates rise should be based on April’s inflation, and the chancellor should use the… budget to make this correction, supporting business investment and helping to drive down prices for consumers.”
Record number of in-store transactions made using contactless
A record 93.4% of in-store card transactions up to £100 were made using contactless in 2023, according to data from Barclays.
The figures are based on Barclays debit card and Barclaycard credit card transactions.
Shoppers made 231 transactions on average, spending an average of £15.69 each time.
This added up to the typical shopper making £3,620 worth of contactless payments over the year.
While contactless is still more popular among younger age groups, the gap between older and younger people using the tech is narrowing, Barclays said.
Last year, the proportion of active users among 85 to 95-year-olds passed 80% for the first time.
And for the third year in a row, the over-65s were the fastest-growing group for contactless usage, Barclays said.
A survey of 2,000 people by Opinium Research for Barclays indicated just 3% of over-75s prefer using mobile payments to physical cards – compared with a quarter (25%) of 18 to 34-year-olds who said they prefer to use their phone.
More than a fifth (22%) of people aged 18 to 34 regularly leave their wallet behind when out shopping in favour of paying with their smartphone, compared with just 1% of over-75s.
Just under a fifth (18%) of people said they struggled to remember their PIN.
For the second year running, the Friday just before Christmas (22 December 2023) was the biggest day for contactless payments, as shoppers picked up last-minute gifts and enjoyed drinks as they clocked off for the holiday.
Karen Johnson, head of retail at Barclays, said: “In 2024, we expect to see a greater shift to payments using mobile wallets, as more bricks-and-mortar businesses integrate the technology into their customer experience.
“Many of our hospitality and leisure clients are finding success by giving customers the ability to order and pay from their table by scanning a QR code.”
‘Real danger’ UK will miss out on economic growth without green plan – CBI economists warn
The UK will “miss out” on economic growth unless it finally comes up with an industrial strategy to green the economy, the leading business group has warned.
As the UK economy has stagnated in recent years, the value of green industries like renewables, eco-friendly heating and energy storage is growing and will help unlock further cash for the UK, according to economists at the Confederation of British Industry (CBI).
They found that while Britain’s GDP growth was stuck at around 0.1% last year, its net zero economy grew by 9%, and attracted billions of pounds in private investment.
It argues private investment is key to unlocking growth.
The UK has committed to reaching net zero by 2050, but the report comes after Labour rowed back on its £28bn green investment pledge, and the Conservatives waged a rhetorical attack on climate policies.
Net zero means almost eliminating greenhouse gas emissions and requires changes to almost every sector, from food to housing, transport to construction.
The businesses implementing these changes – including solar panel installers and green finance advisers – added £74bn in Gross Value Added (GVA) in 2022-23, which is larger than the economy of Wales (£66 billion), according to the CBI Economics report.
But analysts at CBI Economics and thinktank ECIU, which commissioned the report, warned “the strength of future growth is in jeopardy”.
Unless the UK draws up a “Net Zero Investment Plan”, it will lose out to places with larger economies with clear plans, like the US And EU, it said.
Louise Hellem, CBI chief economist, said: “Green growth prizes could deliver a boost of up to £57bn to GDP by 2030, but global competition is heating up.
She added: “If we can’t outspend our international competitors, we need to outsmart them. And the way to do that is really through ambitious policy frameworks that can direct capital into the UK’s green industries.”
Ms Hellem said the UK economy is “well-placed to be a world leader in this space”, given its “unique blend of advanced manufacturing capacity, world leading services industry and energy technical skills”.
“That means that investors do really see opportunities in the UK market.”
‘Real danger’ UK will miss out
Getting to net zero is likely to cost about £10bn a year until 2050, according to the Office for Budget Responsibility, which is roughly equivalent to the annual defence budget, though the majority of the cost is likely to be recouped in savings.
Many technologies that scientists believe are essential to the net zero transition remain extremely expensive, such as hydrogen and carbon capture and storage.
Adam Berman, deputy director of advocacy at industry group Energy UK, said public investment can “de-risk” these technologies and “crowd in” private sector cash, that can then bring down the price.
Jess Ralston from energy thinktank ECIU, said: “The UK is in real danger of missing out on more investment from negative rhetoric and U-turns around net zero, when the EU and US are offering clear plans and are willing to invest themselves.
“Investors want certainty and that comes from long term stable policy – whoever forms the next government will have to remember that, if it wants to see the net zero economy continue to grow.”
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