The European private equity fund, which is based in London, will buy the stake for 190 million euros ($246 million) via a capital increase, the companies said in a statement today. The agreement implies an enterprise value of 940 million euros for the Gaydon, England-based automaker.
“Investindustrial’s new investment reflects and sustains the unique position of Aston Martin within the industry,” Aston Martin Chairman David Richards said in the statement.
The deal gives Aston Martin a much needed cash infusion to invest in automotive resources to compete with Volkswagen AG (VOW)’s Bentley and Fiat SpA (F)’s Ferrari. Investment Dar Co., which led a group of investors that bought Aston Martin from Ford Motor Co. (F) in 2007 for 503 million pounds, will remain a major shareholder.
Investindustrial has a track record of turning around high- end vehicle manufacturers after selling Italian motorcycle maker Ducati, which it acquired in 2006, to VW’s Audi this year for 860 million euros.
The investment fund plans to “achieve a similar transformation and rejuvenation that we achieved with Ducati, by expanding the model range and strengthening the dealership network,” Andrea Bonomi, Investindustrial’s chairman, said in the statement.
Investment Dar hasn’t had funds to spare for Aston Martin. The Kuwaiti company agreed in February last year to reorganize 1.37 billion dinars ($4.9 billion) of its own debt after missing payment on an Islamic bond in May 2009. The restructuring is being implemented under Kuwait’s Financial Stability Law, enacted by the government in April 2009 to bolster financial institutions hurt by the credit crisis.
Aston Martin is the only global luxury-car brand that’s not part of a larger auto group and its independence could be a handicap with the auto industry under pressure to develop technologies to improve fuel efficiency. Bayerische Motoren Werke AG is investing more than 1 billion euros this year on making engines more efficient and developing electric vehicles. That sum exceeds Aston Martin’s 2011 revenue of 507 million pounds.
“The problem at Aston Martin is that they have no major company behind them,” Hanover-based Norddeutsche Landesbank analyst Frank Schwope said by telephone. “For Bentley at Volkswagen, which also sells a few thousand cars, and Rolls Royce at BMW, they can reach back to the parent for technology.”
The British carmaker’s adjusted earnings before interest taxes, depreciation and amortization last year fell 18 percent to 76.2 million pounds, with deliveries steady at about 4,200 vehicles.
The bulk of Aston Martin’s lineup consists of two-door coupes like the DB9, Vanquish and Vantage. It also offers the Cygnet city car, which is based on Toyota Motor Corp. (7203)’s iQ. Aston Martin vehicles have been featured in 11 James Bond movies, including the vintage silver DB5 in the latest one, “Skyfall.”
Moody’s Investors Services highlighted the British elite brand’s deteriorating finances when it put the company on review for a downgrade on Nov. 30. Aston Martin had negative free cash flow of 27 million pounds in the third quarter, reducing its liquidity to 24.8 million pounds as of Sept. 30, Moody’s said.
The carmaker’s sales tumbled 20 percent to 2,520 vehicles in the first nine months of 2012. Declining deliveries and weaker demand for cars with 12-cylinder engines led to an operating loss of 3.6 million pounds, Moody’s said, citing data released to bond investors on Nov. 28.
Moody’s rates Aston Martin’s debt with a non-investment grade B3 rating, which is defined as having “high credit risk.” The ratings company said an agreement on a new investor would have a “material positive” effect on Aston Martin’s finances.
Large carmakers can help niche manufacturers stay competitive by spreading development costs across brands and models. Fiat owns Maserati and Alfa Romeo as well as Ferrari. VW completed the purchase of the Porsche car brand this year, adding the maker of the 911 alongside Audi, Bentley, Lamborghini and Bugatti.
VW uses the same platform to underpin the Lamborghini Gallardo and Audi’s R8, while the Bentley Continental Flying Spur and GT models share components with the VW Phaeton.
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