MARCH 15, 1999

Reynard buying Riley & Scott?

REYNARD MOTORSPORT INC., the holding company of all Reynard operations, is rumored to be on the verge of buying the US racing car manufacturer Riley & Scott. The Indianapolis-based company produces a range of different racing machinery, notably the highly-successful Mk III sportscar and the Mk V Indy Racing League single-seater. Founded in 1990 by Bill Riley, Bob Riley (unrelated) and Mark Scott, the company has enjoyed considerable success in sports and touring car racing. It has struggled badly in IRL.

If the deal goes ahead, it will give Reynard a much stronger presence in the United States. To date Reynard North America has only provided local support to the CART teams. Last year the company expanded its support services with the new Automobile Research Center in Indianapolis. This includes a half-scale windtunnel and a seven-post test rig. The acquisition of Riley & Scott would provide the company with a US production facility and the opportunity to supply chassis to sportscar teams and to the IRL. Although IRL cars are less expensive than those built for CART, the series could provide a profitable market for Reynard and enable the company to compete at the Indianapolis 500, the most prestigious race in North America.

The deal would also allow Reynard to strengthen its links with General Motors. Riley & Scott is currently developing the racing Corvette C-5R for Chevrolet and is also building the prototype for the planned Cadillac Le Mans 24 Hours project.

Reynard will be able to fund the deal with money raised by the issuing of shares in Reynard Motorsport Inc. According to the latest filings by Reynard with the US Securities and Exchange Commission this will raise $40.4m for the company. Half of this money will be used to pay for the acquisition of a transmission company and to pay off debts, but $4.3m has been allocated for investment in computational fluid dynamics technology and another $14.4m has been earmarked for acquisitions. The filing states that: "Reynard may seek to acquire companies that complement existing operations". Riley & Scott fits that description perfectly.