After many weeks of discussion and approaches from other parties, Aston Martin has confirmed agreement for Investindustrial to take a a 37.5 per cent stake in the company, in exchange for £150m of equity capital.
The equity stake comes with proportional voting rights and implies a total enterprise value of £757 million or a little over 9 times earnings, slightly higher than the US$1 billion (£625 million) originally estimated by analysts. Aston Martin generated a turnover of £511 million in 2011 with EBITDA earnings of £81 million.
The Investment Dar (TID), which led a group of investors that bought Aston Martin from Ford in 2007 for £479 million, will remain a major shareholder in the company.
Aston Martin intends to invest more than £500 million (US$800 million) in its new product and technology programme over the next five years, with the support of The Investment Dar and Investindustrial, although it hasn’t said exactly how this will be achieved. To put that figure into perspective, BMW will invest US$1 billion in the next 12 months, just on its development of new engines and powertrains.
The Investment Dar (TID) has been in protective administration under Kuwait’s Financial Stability Law since 2010, while it restructures its assets and liabilities. This is scheduled to continue for eight and half years, so it seems unlikely TID will play a material role in bringing much in the way of new capital to the business.
The new £189,995 range-topping Aston Martin Vanquish.Aston Martin Chairman David Richards said: “I am delighted that Investindustrial has decided to become a major investor in Aston Martin. With the support of The Investment Dar, we have made substantial progress over the past five years in laying the foundations for success as one of the world’s leading luxury sports car manufacturers.
“Investindustrial’s new investment reflects and sustains the unique position of Aston Martin within the industry. With this partnership and the continued commitment of The Investment Dar, we look forward to working with our shareholders as we realise our vision and exciting future plans.”
Investindustrial previously owned Italian motorbike company Ducati, before selling to German carmaker Audi for US$1.1 billion earlier this year, earning a 300% return on its original investment. It holds assets under management of around $4 billion, including investments in leading British outdoor brand – Karrimor, Italy’s biggest theme park – Gardaland and satellite services operator – Eutelsat. The investment company was established in 1990 by the wealthy Bonomi family, which originally amassed its wealth in the construction and industrial manufacturing sectors.
Andrea C. Bonomi, Senior Principal at Investindustrial, comments: “We are delighted to form part of this iconic global, but quintessentially British brand. We are looking forward to working with the management and Investment Dar to achieve a similar transformation and rejuvenation that we achieved with Ducati, by expanding the model range and strengthening the dealership network, throughout the world.”
Adnan Al-Musallam Chairman & Managing Director of The Investment Dar said: “We welcome Investindustrial as new partners in our collaboration with Aston Martin. With our continued commitment and the support of Investindustrial, Aston Martin is in a strong position to pursue its plans for development.”
There was no mention of any involvement by Mercedes-Benz in the planned 5-year product and technology programme, despite the fact that Investindustrial currently operates a parts-sharing alliance with the German car maker. In fact a spokesperson from Investindustrial said in a statement today that no agreement had been made on a technical partnership for Aston Martin with Daimler AG’s Mercedes.
Aston Martin has confirmed that production will remain at the British marque’s global headquarters at Gaydon in Warwickshire, where skilled workforce of 1600 employees design and produce the current range of cars.
* * *
While the capital injection will no doubt appease ratings agency Moody’s, which last week warned it was reviewing Aston Martin’s credit rating, the deal leaves a number of questions unanswered about how Aston Martin will compete with the likes of Ferrari, Bentley, Porsche and Lamborghini without a major platform sharing agreement and access to the latest new technologies.
And while Investindustrial has successfully demonstrated its capabilities as a private equity house (by selling Ducati to Audi), Aston Martin needs the commitment of a long-term investor able to steer it towards a sustainable (not just profitable) future.
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So, so much for “several new players have entered the frame”:
https://transmission-one.com/2012/12/an-update-on-aston-martin-india-steps-back-while-china-and-maybe-germany-comes-forward/
and the BBC’s go-to man, ‘expert’ on all matters Auto industry, Prof David Bailey, and his expectation of a bidding war breaking out for the prized trophy asset, AM:
‘But one industry expert[Bailey] told the Post the negotiations could herald the start of a race to land a share in the Warwickshire luxury car maker’;
‘Prof Bailey, of Coventry University Business School, said other bidders may join the race in the wake of the negotiations being made public.
“This could be about getting it into the public domain to maybe smoke out other interested parties,” he said.’
http://www.birminghampost.net/birmingham-business/birmingham-business-news/businesslatest/2012/12/07/aston-martin-confirms-it-is-in-advanced-talks-with-investors-65233-32371340/#ixzz2ENZ8Fkys
Likewise, Hilton Holloway of Autocar magazine’s belief Mahindra was all set to take 50% of AM.
Sorry, Steve, you were all wrong, as my grey matter and years of experience told me from the get-go.
Aston was never a valuable, prized asset, as I said in your first blog on the matter. The £400m valuation proves this. No other bidders came in. Aston/the Kuwaitis were forced to accept the original offer from Investindustrial.
If the claim by Investindustrial is true that Mercedes is not on board, then good. I said Daimler should steer clear. Mercedes-Benz have far more pressing needs, like competing with BMW’s huge-selling 3-series. The F30 3-series and X1 are creaming Merc in China. Mercedes needs all resources devoted to getting the next C-class to market early, the W205, and the new GLA likewise to market asap, to have a big-selling Crossover offering, like the X1 and Audi Q3.
However, if the Italians are denying any Merc link to save AM embarrassment, as it would look to Joe Public like a de facto Merc takeover, akin to BMW with Rolls-Royce and VW with Bentley, then I wouldn’t be surprised.
How in the hell else is Investindustrial going to get new powertrains, new telematics and so on, all for £100m a year, without buying them in?
Time will tell. The full story should be visible early by next year, when it comes time to renew/replace the Ford Cologne engine supply deal.
As I said way back in the beginning of my articles, they were not about ‘getting it right or wrong’ but instead to open up the conversation for those who’d like to understand the pieces at play and the ramifications thereof.
When I’ve run similar bids in the past nobody bar a small handful of people ‘really’ know what’s going on, so the vast majority of opinion is precisely that. If I were involved, then I wouldn’t be publishing such information in a public domain and given that my ex-collegues were handling the transaction I’ve been sensitive to avoid straying too far from what’s already publicly known.
Having said that, I know that more than a few parties showed interest in the deal. I also know that this hasn’t just materialised in the past 4 weeks – there have been many discussions during the past 18 months (both from and to AM) exploring the opportunity for new financing. Up until the summer, we were doubtful AM would find a suitable partner, but today’s agreement, at least in the short-term buys the company some time.
It’s not really possible for me to be ‘all wrong’ since I don’t ever remember stating a point of view as fact – the original offer from Investindustrial (as you describe it) was not forced upon Aston Martin, but I do believe it was the best offer available at this time and allows for further changes in the company’s equity structure in the future.
In a world of eternal compromise, that sounds like a reasonable decision for Aston’s shareholders to take – whether it enables them to overcome their most obvious challenge is quite another question indeed. We’ll be watching with interest.
Hi Tata, Never knew your actual name. You too can contribute articles as you are well informed too!