McLaren, the Formula One team which is home to drivers Jenson Button and Lewis Hamilton, will not be following its British rival Williams to the stock market, according to its chief financial officer, Andy Myers.
McLaren is 50% owned by Bahrain’s Mumtalakat sovereign wealth fund with the remaining shares in the hands of its chairman, Ron Dennis, and Saudi tycoon Mansour Ojjeh. In November 2009 they bought out former 40% shareholder Mercedes but the motivation was not to list the business. “The McLaren group has no plans to float in the future,” said Myers.
In contrast, on 2 March Williams will become the first F1 team to float when it lists 28% of its shares on the Frankfurt stock exchange with the majority of the offering sold by its co-founder Patrick Head as he intends to retire this year.
Williams has reduced and tightened the flotation share price range from €24 to €29 a share, to between €25 to €27 (£23) a share, ahead of pricing on 1 March. This followed the cancellation of F1′s season-opening race in Bahrain owing to the civil unrest in the country.
Myers said McLaren’s strategy “is to remain as a private company in the ownership of a small number of focused shareholders, since we believe that best suits our business model”. Remaining private has allowed the directors to stay in control without answering to external shareholders. This can be crucial in the fast-changing world of F1 and it has steered McLaren’s drivers to more championships than any other team except Ferrari.
Success has attracted a string of blue chip sponsors to the team including Exxon Mobil, Hilton, Hugo Boss and title partner Vodafone, which is believed to be paying McLaren about $75m (£47m) annually – nearly double Williams’ estimated sponsorship tally.
In the 12 months to 31 December 2009 sponsorship income and prize money fuelled McLaren’s revenue to £174.8m and left it with an after-tax profit of £50.2m – 10 times higher than Williams’ net result in the same year.
McLaren finished 2009 third in the standings with Williams four places behind it. The crucial difference between the two teams is their costs. McLaren spent 30% more than Williams on its F1 campaign in 2009. This may translate into better results on track but that is no guarantee that investors will benefit.
Sir Frank Williams, Williams’ team principal, said that the team’s ambition was to “get back to the front of grid”. He hopes the launch of the new Williams-Cosworth FW33, with blue and white livery, will help. “We know that won’t be easy, but we hope this car will take us closer to the leaders than we were in 2010. As a team, we’re as ambitious now as we’ve ever been,” Williams said.
Martyn Hawkins, senior consultant for the Sports Business Group at accountancy firm Deloitte, said: “Attracting appropriately skilled performers to allow teams to hit on-track performance targets can be a costly business.”
However, he added that “it was the cost pressure on player wages and transfer fees – combined with ineffectual cost control – that was one of the main factors that prevented the majority of football club stock market flotations from being successful”.
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