April 20, 2014

The Aston Martin deal: How it stands

Aston Martin have confirmed it is currently under offer for a stake in the famous motoring brand and it is thought that a deal could be made within the next week, if not the next few days.

Kuwaiti finance firm Investment Dar Co. and owners of the brand are looking to sell part of AML and last week had reportedly agreed to sell a minority stake to an Italian buyout firm for £250 million, but the last seven days have seen a higher bid from an Indian Tractor company Mahindra & Mahindra Ltd.

A document has been issued to bond holders on Thursday, explaining the situation: “Aston Martin, with the support of its shareholders, confirms that discussions are at an advanced stage to secure a capital increase which will ensure it can deliver its medium and long-term growth plans.”

Mahindra’s bid is currently undisclosed and may include a demand for an increased share of Aston Martin than the 40 per cent currently on offer. DAR are looking to keep the majority of the shares, however this new offer may see them allow a 50/50 split of the company.

DAR paid £479 million for Aston Martin back in 2007 from the Ford Motor Company. The investment firm needs to retain at least 50 per cent of ownership to ensure that a change-of-control agreement isn’t activated on £300 million of high-yield bonds, according to one investor dealing with Aston Martin’s debt.

Another investor involved with their debt insists that the deal with Mahindra is for 40 per cent of the luxury car company’s equity and voting rights and values the firm at £750 million. However, the Italian buyout firm’s deal comes with a technical partnership with Mercedes and AMG, which could be more prosperous in the long-term than a larger equity injection on its own.

Both bids are currently being scrutinized and Mahindra are hoping for a swift conclusion, with sources close to the deal commenting that they want the deal finalised “by the end of the week”.

However, industry experts have their doubts about the potential agreement with the Indian firm as Mahindra have a history of buying coveted companies but lack a true connection with their acquisitions. The Unite union, on the other hand, have expressed their support for the proposed deal, as they feel Mahindra would be a better option than a private equity firm.

DAR deny that they are looking to sell off Aston Martin for good, but it has been no secret that the Kuwaiti firm have struggled under the debt load used to fund its acquisitions. It was reported that in February 2011, lenders agreed to take a 10 per cent stake in DAR in exchange for an initial $70 million equity injection and a full repayment of its $3.7 billion debt under a decade.

About the author: Sam Bisby writes for Fleet Card Netherlands, who offer fuel cards for those travelling across Europe. Click here to find out more about their fleetkaart deals.


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