What Apple Stands to Get If It Buys McLaren

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For a company that has reportedly been reducing the size of the staff in its mysterious automobile program, a story in Wednesday’s Financial Times that Apple Inc. (NASDAQ: AAPL) is considering acquiring sports car and Formula One car maker McLaren seems a little out of whack. Really, who wants a self-driving, $1.15 million McLaren P1?

The FT reckons Apple could acquire McLaren for about $1.3 to $2 billion, less than Apple paid for headphone-maker Beats. But if Apple were to pull the trigger on such a deal, the company would probably be looking at McLaren’s advanced auto technology more than at the carmaker’s $340 million in 2015 sales.

Indeed, sources told the FT that Apple’s interest in the carmaker centers on its technology, engineering skill, and patent portfolio. If the deal were to go down, it would give Apple a proven team on employees who know how to build cars. Put the emphasis on “team” because the dozens of former Apple employees who have been leaving the company’s car program were very likely a group of individuals that Apple had been unable to form into a team.

McLaren is also a lot cheaper than Tesla Motors Inc. (NASDAQ: TSLA) which has a market cap of nearly $30 billion at Wednesday’s trading price during the noon hour. And while McLaren is losing money, it is not losing it as fast as Tesla. Last year’s operating loss at Tesla totaled more than $716 million compared with a loss of about $29.3 million at McLaren.

As part of the deal Apple would also acquire a Formula One racing team. Whether or not Apple needs the marketing exposure that comes with an F1 team is certainly debatable.

Liberty Media founder and chairman John Malone just offered to pay about $8 billion in cash and assumed debt for the racing circuit. While far more popular in Europe than in the United States, F1 could become more popular here and in other parts of the world if Liberty Media adds an F1 channel to its cable lineup.

According to crash.net, the McLaren Honda team’s 2015 F1 budget totaled about $520 million, including about $161 million from sponsors, about $242 from partners, and about $116 million from TV and media rights. Apple’s piece, presumably, would be the $161 million, certainly not a fortune to a company with nearly $150 billion in cash in the bank.

But along with an F1 team comes criticism of fossil-fuel cars and pushback from stockholders who would rather see the $161 million shared amongst themselves rather than frittered away on some executive’s boyhood dream.

Do we expect this deal to happen? Not really, but it is interesting to ponder.

Apple stock traded down 0.75% in the early afternoon Wednesday at $112.72 in a 52-week range of $89.47 to $123.82. The consensus 12-month price target is $123.66.