Apple to Seek Strategic Stake in Luxury Carmaker McLaren

Apple Said to Seek Stake in Luxury Carmaker McLaren
  • McLaren deal would give Apple access to technology and patents
  • Electric motorbike maker Lit said to have self-driving patents

Apple Inc., ramping up efforts to disrupt the transportation industry, is seeking a stake in luxury carmaker McLaren and is in talks to buy Lit Motors, an electric motorbike startup, people with knowledge of the matter said.

The technology giant would more likely make a large investment in U.K.-based McLaren than buy it outright, according to one of the people, who asked not to be identified because the matter is private. Apple wants to acquire Lit Motors because the San Francisco startup has several international self-driving patents, said another person. BMW, Audi and a South Korean automaker are also actively pursuing a Lit deal, the person said.

Eager for a new hit to replace the iPhone, Apple has hundreds of engineers working on car design and has been targeting a release as soon as 2020. While the company has been focusing more on self-driving software in recent months, it has never abandoned efforts to build its own vehicle or tie up with an established carmaker, according to people familiar with Apple’s thinking. With sports cars starting at almost $200,000, McLaren would bring brand strength, advanced engineering and a portfolio of patents to the equation.

The Financial Times earlier reported that Apple was considering buying all of McLaren or taking a stake in the U.K.-based carmaker. The New York Times earlier reported Apple’s talks with Lit Motors. Apple shares fell less than 1 percent at the close in New York.

McLaren denied it was negotiating with Apple. “I can confirm that McLaren is not in discussion with Apple about any potential investment,” Michael Flewitt, chief executive officer of the automotive unit, said in a text. Apple, Lit Motors, BMW and Audi declined to comment.

McLaren was likely to be valued from 1 billion pounds to 1.5 billion pounds ($1.3 billion and $1.95 billion) the FT said. That would make it Apple’s biggest acquisition since the $3 billion purchase of Beats Electronics, the audio group founded by Dr Dre and Jimmy Iovine, in 2014.

Closely held McLaren is more than 55 percent owned by Bahrain Mumtalakat Holding Co., the investment arm of the kingdom of Bahrain. The next two biggest shareholders are TAG Group Ltd., a Luxembourg-based holding company, with 11 percent, and McLaren Chairman Ron Dennis, with 10 percent.

In a call with analysts earlier this year, Chief Executive Officer Tim Cook suggested Apple would do more acquisitions and strategic investments. Apple had $232 billion in cash at the end of June, about $215 billion of that is kept outside of the U.S., Cook told investors in July.

Many analysts have speculated that Apple would buy Tesla Motors Inc., deemed a good fit because it sells electric cars with self-driving capabilities. Tesla shares gave up an early rally once the FT news broke.

Buying a stake in McLaren is less obvious because the U.K. company is best known for luxury cars that go very fast. What’s more, the company lacks mass-manufacturing capabilities. McLaren can make only a few thousand cars a year, compared with mainstream automakers with several factories each cranking out hundreds of thousands of autos each year.

Dominic O’Brien, a London-based analyst at Exane BNP Paribas, said acquiring McLaren would be a “strange move” for Apple. “They wouldn’t gain manufacturing scale or much know-how about mass-produced cars,” he said. “McLaren isn’t known for electric cars or its autonomous driving capability.”

Apple is working on a self-driving project dubbed Project Titan, according to people familiar with the plan. The company recently hired the former head of BlackBerry Ltd.’s automotive software division and has continued to raid auto companies for engineers with expertise in designing vehicle manufacturing systems.

The question, said William Blair & Co. analyst Anil Doradla is whether Apple uses McLaren as a “tech incubator” or for “rolling out a car.”

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