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Saudi wealth fund reportedly set to buy McLaren stake in $550m deal

Move comes as kingdom faces criticism from rights groups ahead of hosting its first-ever Formula 1 race in December
McLaren's British driver Lando Norris drives during the Formula 1 Austrian Grand Prix at the Red Bull Ring race track in Spielberg, Austria earlier this month (AFP)

Saudi Arabia's Public Investment Fund (PIF) and global investment firm Ares Management are in advanced talks to take a $550m stake in Britain's McLaren Group, according to the UK's Sky News.

McLaren Group includes the supercar maker as well as McLaren Racing, which competes in Formula 1 and IndyCar in the United States, and is also entering the Extreme E off-road electric series next year.

Sky on Friday cited banking sources and said McLaren was set to announce a $760m equity raise, with $550m of new capital from PIF and Ares and the rest from existing shareholders.

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The equity-raise was still being finalised on Friday and could still be delayed, the sources cautioned. There was no immediate comment from either McLaren or PIF regarding the deal, Reuters reported.

Saudi Arabia is set to host its first-ever Formula 1 race in December in the coastal city of Jeddah. Riyadh's growing interest in hosting high-profile sports competitions has been consistently criticised by human rights advocates, who accuse the country of “sportswashing”.

In March, a report by Grant Liberty said that Saudi Arabia had spent at least $1.5bn on such events in a bid to bolster its reputation, a new report reveals.

The human rights organisation highlighted sports including chess, boxing, golf, tennis and $60m alone on the Saudi Cup, the world’s most lucrative horse racing event, with prize money of $20m.

Rights group say allowing the kingdom to host such events helps its rulers normalise their behaviour by shifting attention away from Riyadh's well-documented human rights violations, including its crackdown on internal dissent and its leading role in the war in Yemen 

Night race

Bahrain's Mumtalakat sovereign investment fund is McLaren's majority shareholder with a 62.55 percent stake, according to its website. Mumtalakat also did not respond to a request for comment.

Speaking to Middle East Eye earlier this year, former F1 supremo Bernie Ecclestone, who brought the motorsport to Bahrain, said the kingdom had wanted to "use the brand to promote the country".

McLaren had a $415m equity injection from existing shareholders in March 2020 and last April completed a $235m sale and leaseback deal on its Woking headquarters.

US-based investment group MSP Sports Capital also acquired a significant minority stake in McLaren Racing last December, in a deal that brought in $255m.

The inaugural Saudi Arabian Grand Prix will take place along Jeddah's corniche, which runs along the Red Sea. It will be one of Formula 1's street circuits, held on closed city streets, and will take place during the night.