Apple Stock Has Much to Gain from Takeover of McLaren
The McLaren Automotive emblem, a swish of sorts, has more in common with the Nike Inc (NYSE:NKE) logo than it does with Apple Inc.’s (NASDAQ:AAPL) famous Apple symbol. But, if the rumors are true, the market should welcome a marriage of Apple and the privately held McLaren Technology Group. Indeed, Apple stock would gain if the Cupertino, California-based company actually went through with buying the British car company, which also happens to own and operate a Formula 1 team.
Apple stock trading seemed indifferent, as news of the company’s intentions for McLaren hit the global headlines. The Financial Times was the first to report on it, but McLaren has denied the rumors. But it’s difficult to believe that that most-British of publications, the Financial Times, would have broken the story on September 20 haphazardly. After all, the McLaren headquarters are in Woking, near London.
McLaren has worked with Mercedes Benz and BMW (Bayerische Motoren Werke AG (FRA:BMW)) in the past. Perhaps it wants to resolve some pending issues? The fact is that investors—those who understand Apple and its business well—would welcome the acquisition. McLaren brings a wealth of experience to an Apple car project, the kind that would take years and billions of dollars to aquire, but at a bargain price. Even if the takeover rumors turn out to be a mere partnership or a partial investment, Apple stock should respond in a bullish manner.
Why does it make such good sense for Apple to buy McLaren? Clearly, it is because the deal would give AAPL stock a foothold in the automotive industry based on an established player.
Moreover, McLaren has the cool factor, design, and technology to match Apple’s image and goals. So while McLaren denies the rumors, saying: “We confirm that McLaren is not in talks with Apple about any investment,” there is good reason to believe the newspaper, which has stood by its claims and its source. (Source: “Untangling the Apple Takeover of McLaren Rumor,” Torque News, September 21, 2016.)
The McLaren takeover would finally close the years of rumors about a possible “Apple Car.” So, after several discussions with historical manufacturers of the auto industry, Apple could have truly set its sights on the British manufacturer.
Apple products rely on mass production, but the company has wisely realized that it is one thing to make technology products and quite another to make a car. AAPL shareholders should thank their lucky stars that Apple managers have acted wisely. Tesla Motors Inc (NASDAQ:TSLA) has shown that starting a new car company in the 21st century is difficult. The only guarantee is that delays will occur and high expectations will be deflated.
Apple Had Three Options for its Car Project
Having apparently abandoned its car-from-scratch idea, “Project Titan,” Apple has three options left to enter the car market: provide software solutions to brands, partner with a brand for a co-branded car, or buy a car manufacturer to internalize skills and hardware.
The third option is best for Apple and Apple shareholders. McLaren certainly makes for a fascinating target. The company is not profitable and, at the rumored price of £1.0-1.5 billion, it’s a bargain. McLaren also makes electric motors for the Formula E—an all-electric car racing series—and the company also wants to build a fully electric car. Now it has carved out its market niche in the supercar sector.
In other words, through McLaren, Apple has a one-stop-shopping route to challenging Tesla for the very market it created.
Tesla CEO Elon Musk has made fun of Apple employees, telling a German newspaper that Apple hires the engineers that Tesla fires. (Source: “Elon Musk: Here’s why we call Apple the ‘Tesla graveyard’, MarketWatch,” October 17, 2015.)
Well, Musk wasn’t counting on a McLaren deal, and he should have, given that he once owned and crashed the famous-and-desirable McLaren “F1” supercar. Musk might want to attend a Formula One race in the near future. He could see an Apple-McLaren car going head-to-head against Ferrari NV (BIT:RACE), Mercedes, or Red Bull GmbH. How’s that for irony?
Apple would also have the perfect tool to beat Google (Alphabet Inc (NASDAQ:GOOG)) to the punch. For several years, Apple was rumored to be working on Project Titan, an electric car that could compete with Google cars. By acquiring all or part of McLaren, Apple stock would have nothing but upside to gain. As for Apple Inc. itself, the company would certainly gain from a major strategic partner, in the same way the UK did with the United States during World War II.