Aston Martin Lagonda – A View To A Deal

The golden touch has just been added to the growing profile of Aston Martin Lagonda Global Holdings (LON:AML) and it came from the East.

Yesterday morning it was announced that Geely Holding, China’s leading independent automotive group, has committed some £234m to become the third largest shareholder in the luxury car group.

Geely has previously bid for the group, in 2020 and tried again in the summer of last year.

The Deal

It is going to acquire 42m shares from The Yew Tree Corporation @ 335p a share and also subscribe for 28m new shares in the group at the same price.

That means that the motor outfit ends up with an extremely useful £95m in cash to add to its coffers in support of its growth and vision to be the world’s most desirable ultra-luxury British performance brand.

Geely, which owns Volvo, has also agreed not to increase its stake above 22% until August next year.

Market Reaction

Upon the news yesterday morning the group’s shares hit a 288p peak before inevitably a round of profit-taking clipped them back to 255p, then recovering their poise to trade within the 260p-270p range for the better part of the day.

Shareholdings

In the process The Yew Tree Consortium remains as the group’s largest shareholder with 21% of the increased equity, with the Public Investment Fund holding 18% and with Geely more than doubling its stake to 17%.

The Benefit

Apart from the massive cash boost, the Chinese group offers Aston Martin a deep understanding of the key strategic growth market that China represents, as well as the opportunity to access their range of technologies and components.  

Geely Chairman Eric Li stated that:

“Our decision to increase our shareholding in Aston Martin reflects our confidence in the company’s growth prospects, its technologies and its management team.

Since first acquiring our minority holding last September, we have worked collaboratively with Executive Chairman Lawrence Stroll and his colleagues and now look forward to exploring joint technology synergies and new growth opportunities to help this iconic automotive brand achieve its full potential.”

Executive Chairman Lawrence Stroll commented that:

“I, and each member of my consortium, remain fully committed to, and excited by, the future success of Aston Martin. 

We remain on track to deliver our strategic objectives and starting this month we will bring to market our new portfolio of game-changing sportscars. 

We remain the largest shareholders in the Company and continue to be confident that we will build a business of great value for all of our shareholders.”

Shares Were Running Strongly Ahead On Wednesday

It was interesting to note that the £1.82bn group’s share price rose 7.25% on Wednesday to close 16p higher at 231.5p ahead of yesterday’s impressive news.

Obviously, more than the close advisers, somebody else must have known what was going on.

That was on the back of a considerable 15m shares being dealt in the market, some nine times the average daily dealing volume.

My View – 35% Up In Seven Days, Still Heading Higher

After hitting 288p at the peak of dealings yesterday morning straight after the news, the group’s shares closed last night at 260p, up 28.80p on the day, some 12.5% higher after 5m shares were traded.

We can now assume that Geely will stay inside the deal terms and not go above 22% within the next year or so, but with 17% that does give it some ability to add another 5% to its new holding when the deal is completed.

I am convinced that Geely will require to play a significant part in the group’s growth.

The market capitalisation of this group, which as I stated just over a week ago, is way outside of my normal criteria, but still stick to my forecast that the group’s shares are set for another big run upwards.

Even so, I am very pleased that Master Investor pointed the way for what proved to be a near 35% turn within seven trading days, and there is still so much for patient investors to go for in the new equity shaped business.

(Profile 10.05.23 @ 213.5p set a Target Price of 265p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)