Apple Inc. (NASDAQ:AAPL) wants to buy McLaren Technology Group, the British privately-owned sports car manufacturer and Formula 1 team. The news has not moved Apple stock, one way or the other. (Source: “Apple in talks with racing carmaker McLaren,” Financial Times, September 21, 2016.)
But, as often speculated in Profit Confidential, the Cupertino, California-based company wants a showpiece for the Apple brand. McLaren is co-owned by chair/CEO Ron Dennis and Mansour Ojjeh, of Bahrain’s sovereign wealth fund Mumtalakat.
By acquiring McLaren, maker of supercars, Apple has sent the clearest sign of how the company may choose to transform the auto industry. For some time, the house of Apple has been trying to get into the car industry. It has started to research how to build an electric driverless vehicle, “Project Titan,” and such an achievement would likely mark the next big bullish move for Apple stock.
For Apple shareholders, a McLaren purchase should not leave anyone awake at night. At a potential value of between a billion and a billion-and-a-half pounds, it represents a fraction of Apple’s European tax bill. (Source: Ibid) Still, it would be Apple Inc.’s largest-ever acquisition after the Beats audio group founded by Dr. Dre and Jimmy Iovine, which Apple bought for $3.0 billion.
McLaren makes cars which start at just under $200,000 and easily surpass a million dollars for the “halo” models. But more than that, McLaren offers Apple a turnkey Formula 1 racing team, complete with all the cutting-edge technologies this implies. Last year, McLaren made 1,654 cars, raking in some £450.0 million in revenue. The British supercar company was planning to invest a billion pounds over the next six years to develop new models and technologies.
Apple, for its part, would get the whole portfolio of technology, engineering, and patents. Presumably, some of these will be compatible with the work that Apple has already done on its car project. Apple has established an entire design and engineering team to work exclusively on its electric and self-driving car of the future, recruiting, among others, personnel from Tesla Motors Inc (NASDAQ:TSLA) and Mercedes-Benz.
Recently, various media reports suggested that Apple had partially abandoned its ambitions in the auto sector, presumably laying off most of the staff who worked on the project.
Shares of Apple stock dropped $0.96 per share or 0.84% to $112.62 as of mid-trading on Wednesday.