JULY 12, 1999
DaimlerChrysler buys 40% of McLaren
"This element of our long-term strategy is designed to further enhance our products and differentiate the Mercedes-Benz brand in an increasingly competitive market," said DaimlerChrysler chairman Jurgen Schrempp.
McLaren intends to design and build the new Mercedes-Benz SLR supercar for DaimlerChrysler. This will begin to be marketed in the year 2003 and is intended to be a competitor to Ferrari in the supercar market. The aim is to build around 500 cars a year.
The TAG McLaren Group currently consists of six major companies including McLaren International (the Formula 1 team), McLaren Cars - which will build the road cars, TAG Electronic Systems, TAG McLaren Marketing Services and TAGÊMcLarenÊAudio. The group employs around 750 people and made profits of $34.5m on sale of $165m in 1997. These figures will probably have improved in 1998 but big companies - particularly those which have to answer to shareholders - rarely pay more than 10 times the annual profits of a company.
This would mean that, allowing for a good profit in 1998, that the group is unlikely to be worth more than $500m and so DaimlerChrysler could not easily justify paying more than $200m for the 40% shareholding. With the TAG Group having sold half of its 60% shareholding and Ron Dennis's family having agreed to part with one quarter of its 40% holding, the new share structure will see DaimlerChrysler controlling 40%, TAG 30% and Dennis 30%. The sale will mean that TAG will get around $150m and Dennis will make around $50m. The details of the deal are, however, confidential with all parties bound by a non-disclosure agreement.
The move means that TAG will recoup its investment in the group - probably with a considerable profit as well and that all parties can look forward to further profits if DaimlerChrysler decides to increase its involvement in the future - which is quite possible.