MUMBAI Nov 29 Sports car maker Aston Martin may
look like a shiny trophy that makes an awkward fit for Mahindra
and Mahindra, the world's biggest tractor maker, but
it would help the Indian group realise a long-standing ambition
to be a global player.
Despite its efforts, Mahindra has had a hard time building a
presence outside India, where its boxy jeeps and trucks are the
top sellers in the utility market.
"He wants to get those iconic brands to raise the group's
profile in the international market," said the Mumbai-based M&A
head at a U.S. bank who has worked with the group.
"He" is Anand Mahindra, the 57-year-old group chairman and
grandson of its co-founder, who has turned the diversified
Mahindra group into a $15 billion Indian powerhouse, partly
through deals, but has been unable to replicate that success
Mahindra is the front-runner for as much as half of Aston
Martin, the barely profitable 99-year-old maker of British
luxury cars made famous in James Bond movies, sources said.
Investment Dar of Kuwait, which led an acquisition of Aston
Martin from Ford Motor Co in 2007, denied on Sunday that
it was reviewing two bids for 50 percent after sources said
Mahindra had outbid Italy's InvestIndustrial.
Mahindra's offer for up to half of the company is unlikely
to top $400 million, and a deal could be sealed as soon as this
week, one person with direct knowledge of the matter said.
For Aston Martin, Mahindra would bring deep pockets and
global ambition that could help the British firm expand beyond
the 4,200 cars it sold in 2011. As significant, though, is what
it fails to bring to the table: relevant technology, marketing
savvy and a distribution network.
For Mahindra, Aston Martin would add an iconic and
under-exploited brand without stretching its balance sheet,
giving it another toehold into the global market.
As part of a strategy to raise its profile overseas,
Mahindra last year paid $460 million for South Korea's
money-losing Ssangyong Motor Co. That deal was seen
as a more natural fit, since both companies are SUV specialists.
While the company has managed to crack the lucrative U.S.
market with tractors, it has not with cars, recently scrapping a
six-year push to sell a pickup truck there. Of Mahindra's
own-branded passenger vehicles, just 7 percent are sold abroad.
"With Aston Martin, entering the U.S. market, the customer
is likely to look at you much more seriously as compared to if
you are just an Indian carmaker who also owns Ssangyong," said
Deepesh Rathore, managing director for India at IHS Automotive.
Investment Dar wants to sell Aston for at least what it paid
plus commitment of subsequent equity injection, or $1.1 billion
for the whole company, Bernstein Research wrote in a Nov. 14
report, citing industry sources and calling that price high.
With his neat moustache, perfectly-coiffed hair and elegant
suits, the company's film-buff chairman with a Harvard MBA looks
like he could play a CEO in a movie.
Unlike the chieftains of some of India's more insular family
conglomerates, the outgoing Anand Mahindra is active on Twitter
and is a regular at the World Economic Forum in Davos, a meeting
place of business czars and government leaders.
As a dealmaker, he eschews drama, avoiding costly bidding
wars and mostly sticking to deals that cost less than $1 billion
and don't require heavy debt.
In 2008, he walked away from bidding for luxury carmaker
Jaguar Land Rover. Indian rival Tata Motors ended up paying $2.3
billion in a deal that looked expensive at the time but has
proven to be a blockbuster success.
"Anand doesn't go by emotion or ego in these matters," said
an M&A banker with a foreign bank in Mumbai.
Even as the company vies for Aston Martin, it is eyeing a
couple of smaller European auto component makers that are on the
block due to mounting losses, said another source.
"They don't go after deals proactively and end up
overpaying, and would rather wait for the stressed assets to
come to the market," the banker said.
"The are focused on building a little empire of prized
assets instead of shock-and-awe kind of deals."
In 2009, its Tech Mahindra software arm bought
Satyam Computer Services, which was brought to its knees by its
founder's dramatic confession of accounting fraud, for about
$350 million. Tech Mahindra stanched the bleeding at Satyam and
the deal has put it into the top five of Indian IT outsourcers.
Earlier this year Mahindra was interested in buying at least
part of Swedish carmaker Saab Automobile, later bought by a
consortium, sources said. It was also reported to be eyeing
bankrupt U.S. aerospace manufacturer Hawker Beechcraft.
"They are very portfolio-centric, opportunistic, in their
M&A strategy. They believe in zeroing into a stressed situation
and cleaning the mess quickly so that you can capture the
value," said the investment banking head with a European bank.
Not every deal has been a winner, and past attempts to build
a global presence have delivered mixed results.
French carmaker Renault bailed out of a
loss-making joint venture with Mahindra in 2010 after
disappointing sales of their no-frills Logan sedan, which was
launched in 2007 amid much hype and a hope to export the
Its two-wheeler business, which Mahindra launched in 2008
through its acquisition of Kinetic Motor for about $20 million,
also has not been able to make a significant dent in the market.
Mahindra's interest in Aston Martin has caused plenty of
head scratching in financial and automotive circles.
"You shouldn't buy anything that is available at a cheaper
price, if it's not a right fit. That's the main concern with
Mahindra's bid for Aston Martin. I am not sure if it's worth
their money and time," said the executive at the European bank.
Rathore of IHS said Aston Martin would require plenty of
additional investment. "It doesn't make sense to have a trophy
like Aston Martin because it's quite an expensive trophy to
have," he said.
"They will need to look at range expansion and new product
development. They can't escape from that."