M&M loses out as Investindustrial wins battle for Aston Martin stake

LONDON/MILAN Fri Dec 7, 2012 7:20pm IST

An Aston Martin V12 Zagato is displayed inside a dealership in central Beijing November 29, 2011. REUTERS/Soo Hoo Zheyang

An Aston Martin V12 Zagato is displayed inside a dealership in central Beijing November 29, 2011.

Credit: Reuters/Soo Hoo Zheyang

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LONDON/MILAN (Reuters) - Aston Martin plans to invest $1 billion in new products and technology after Italian private equity fund Investindustrial agreed to buy a minority stake in the British luxury carmaker.

Investindustrial is buying 37.5 percent for $241 million via a capital increase agreed with majority Kuwaiti owner Investment Dar, Aston Martin said on Friday.

The Italian group beat tractor maker Mahindra and Mahindra (MAHM.NS) in a two-way battle to invest in the company, whose sports cars were made famous by their appearance in James Bond spy films.

The cash injection will help Aston Martin better compete with Volkswagen's Bentley and rival UK luxury car manufacturer Jaguar Land Rover, which was bought by India's Tata Motors in 2008 and has since seen huge sales growth, especially in China.

The 99-year-old maker of the DB9 and Vanquish sports cars has struggled in recent years. Last week, it said it sold 2,340 cars in the nine months to September 30, 19 percent down on 2011.

Investindustrial's senior principal Andrea Bonomi said the group hoped to transform Aston Martin in a similar way to its revamp of luxury Italian motorcycle maker Ducati by expanding Aston's model range and strengthening its global dealership network.

Owned by Italy's Bonomi family, Investindustrial bought Ducati in 2006 and sold it for about 860 million euros last April to Volkswagen's Audi division.

Aston Martin said the deal would enable it to invest in new products and a technology programme up to 2018.

Bernstein analyst Max Warburton said it looked like Aston's owners were settling for a temporary fix because they were unable to attract another car manufacturer to invest at the price they wanted. "It doesn't look like a long-term solution," he said.

"This deal doesn't sort scale, access to technology, emissions or entry to new segments."

The British carmaker is owned by a consortium of Aston Martin chairman David Richards, Kuwait's Investment Dar and another Kuwait fund, Adeem Investment Co. U.S.-based Ford (F.N), which sold Aston Martin to them for $770 million in 2007, still holds a small stake.

Aston Martin said its shareholders' stakes "had been reduced accordingly" by the capital increase.

Aston Martin, perhaps best known for its classic DB5 sports car that featured in early Bond movies, makes its cars in Gaydon, Warwickshire, once part of England's motor manufacturing heartland.

The deal comes days after ratings agency Moody's put Aston Martin's non-investment grade B3 rating under review following a 16 percent fall in the carmaker's third-quarter revenue.

The British company said the deal gave the group an enterprise value of 780 million pounds, compared with a value of 630 million pounds prior to the agreement.

It added that no agreement had been made on a technical partnership for Aston Martin with Daimler AG's Mercedes (DAIGn.DE), as some analysts had expected.

Aston Martin rival Jaguar Land Rover has spent some $800 million over the last five years on marketing and expanding its dealerships in China. The communist state is now close to becoming JLR's largest single market.

Aston sells some 15 percent of its vehicles in Asia but wants to significantly boost its presence in emerging markets.

Investindustrial said it expected to receive clearance for the deal from competition bodies in the first quarter of 2013. (Additional reporting by Laurence Frost in Paris; Henry Foy in Mumbai; Editing by Erica Billingham)

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