December 6, 2012 1:18 pm

Investindustrial nears Aston Martin deal

Investindustrial, the European buyout group, is poised to sign a deal to become a major shareholder in Aston Martin Lagonda after the other bidder, Indian automotive group Mahindra & Mahindra, pulled out.

The deal, under which Investindustrial would become a shareholder alongside Kuwaiti group Investment Dar through a capital raising, is expected to close in the coming days, according to three people familiar with the matter.

It would see London-based Investindustrial take a 37.5 per cent stake in the carmaker – whose marque had a starring role in the James Bond films – alongside the current owners, a consortium of Kuwaiti investors led by Investment Dar. It would value Aston Martin at £750m, according to people close to the transaction.

Under the proposed deal, the buyout group would help to double planned investment in the carmaker to about £500m over the next four years, according to one person familiar with the negotiations.

Analysts said that the new investors would have their work cut out to keep Aston Martin competitive in the small, globally competitive sports car segment. The company still relies on engines built by Ford Motor, which sold it to the Kuwaitis in a £479m deal in 2007.

Aston Martin has seen its sales collapse during the credit crunch as demand for sports cars suffered and the company struggled to keep up with rival producers that are part of larger automotive groups, and better able to spread their research and other costs across a bigger base.

“The critical thing for Aston Martin is the investment – being able to invest in new products and platforms,” said Jonathon Poskitt, head of sales forecasting at LMC Automotive. “If you don’t invest, you risk falling behind the competition.”

Investindustrial and the buyout group’s senior partner Andrea Bonomi already have some experience of reviving trophy assets. It sold high-performance bikemaker Ducati earlier this year to Volkswagen’s Audi brand for $1.1bn, making three times its initial investment.

A deal would come days after rating agency Moody’s said it was reviewing Aston Martin for a downgrade deeper into junk territory because of weaker than expected financial and operating performance.

Moody’s said that if Aston Martin was unable to improve its liquidity profile within the next of couple weeks, this would most probably result in a downgrade of the company’s B3 credit rating “that might not be limited to one notch”.

The agency said that Aston Martin’s liquidity profile had “deteriorated materially” in the third quarter of this year, with negative free cash flow of about £27m, because of weaker financial and operating performance.

The company faces an interest payment of £14m due in January.

Aston Martin sold just 2,520 cars in the 12 months to the end of September, down 20 per cent on a year ago, and well behind the more than 7,000 vehicles it sold in its peak year of 2007. Its revenues were down 19 per cent for the period at £305m.

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