McLaren Racing's Formula 1 stake changes hands at a $5 billion appraisal

In a significant move for the Formula One (F1) world, McLaren Racing has announced a major investment that values the team at $5 billion. This new valuation places McLaren fourth in the rankings, trailing behind Ferrari ($4.8 billion), Mercedes ($3.9 billion), and Red Bull Racing ($3.5 billion).

The investment deal, brokered by Moelis & Company, marks the biggest sports team exit ever for an institutional fund. MSP Sports Capital, along with Ares Investment Management, UBS O'Connor, and several smaller shareholders, are selling their stake in McLaren, resulting in a 10x return based on the 2020 pre-money valuation.

The new majority shareholders of McLaren Racing are a consortium led by Indian industrialist Rahul Bajaj and Canadian entrepreneur Michael Latifi. The transaction also involves Bahraini sovereign wealth fund Mumtalakat and Abu Dhabi-based automotive investment group CYVN Holdings.

The financial success of McLaren Racing is evident in its recent financial reports. In 2021, the team turned a $38 million operating profit on $536 million in revenue, a significant improvement from the $137 million loss in 2018.

McLaren's resurgence in the F1 world was further demonstrated last year, as the team won its ninth constructors' title, the first since 1998, and Lando Norris finished runner-up in the driver standings.

The value of F1 teams has been on the rise, with the average value of the 10 teams standing at an impressive $2.3 billion last year, up 44% from 2023. This growth can be attributed to several factors, including the broadening of F1's appeal through Liberty Media's popular Netflix series "Drive to Survive", expanded race schedule, and introduced cost caps.

It's worth noting that the Pohlads are keeping control of the Twins baseball team amid a minority stake sale, as per a related story.

In a move to further strengthen its position, McLaren Racing has also announced Mastercard as the team's naming partner starting in 2026, worth a reported $100 million annually.

Owning an F1 team used to be a license to burn through cash, but 80% of teams made money in 2023, a testament to the financial stability and growth within the F1 industry.

Liberty Media bought the Formula 1 race series in early 2017 for $8 billion, including debt. This acquisition, along with the recent investment in McLaren Racing, underscores the growing interest and investment in the world of Formula One.

Mumtalakat will continue as the team's majority shareholder, ensuring a steady hand in the team's future direction. With the new investment and leadership, McLaren Racing is poised to continue its success and compete at the highest level of motorsport.