MUMBAI, Nov 26 (Reuters) - Indian tractor maker Mahindra and
Mahindra hopes to strike a deal to buy up to half of
British luxury sports car maker Aston Martin by the end of this
week, a person with direct knowledge of the matter said on
The Indian group, the Kuwaiti potential seller and a
possible rival Italian bidder have all refrained from official
comment and the source acknowledged the dealmaking was complex,
with bidders trying to resolve issues around management control:
"There are a lot of moving parts here," the source told
Reuters, adding that an initial 40-percent stake could rise to
50 percent for a total price unlikely to top $400 million.
A successful acquisition would give India's dominant utility
vehicle maker a global luxury brand, four years after it missed
out on Jaguar Land Rover, which went to Tata Motor of India.
Aston Martin sold just 4,200 cars last year but remains a
force in popular culture after a half-century of use by agent
007 in the James Bond movies, including this year's "Skyfall".
Funding the purchase would not be a stretch for Mahindra,
given its low debt-to-equity ratio of 0.29 at the end of March.
Shares in Mahindra fell more than 3 percent on Monday.
Mahindra bid on Friday by topping an offer from Italian
private equity fund Investindustrial that had been agreed on
Thursday with Aston's owner, Kuwaiti investment house Investment
Dar, sources familiar with the talks said.
Investindustrial bid between 200 million and 250 million
pounds ($400 million) for the stake, a source had said earlier.
Some analysts questioned Mahindra's strategy.
"It's difficult to visualise a tractor and an Aston Martin
in the same garage," said Mads Kaiser, a Silkeborg,
Denmark-based fund manager with JI India Equity Fund, which owns
Mahindra shares in its $200-million Indian equities portfolio.
"The acquisition will broaden their portfolio but doesn't
add anything to their tractor or India portfolio," he said.
Mahindra, InvestIndustrial and Aston Martin declined to
comment. Investment Dar's chairman and managing director denied
to a newspaper on Sunday the Kuwaiti firm had received two
offers for its 50-percent stake in the carmaker.
Ford Motor Co. sold Aston Martin in 2007 for 479 million
pounds ($767 million) to Investment Dar and another Kuwait fund,
Adeem Investment Co. Investment Dar went to the market for a $1-
billion debt restructuring last year.
Mahindra, the world's biggest maker of tractors, has had
mixed success in its overseas forays.
It pulled the plug this year on plans to roll out a pickup
truck in the United States, although it has made progress
turning around Ssangyong Motor Co, a money-losing
South Korean SUV maker it bought for $460 million in March 2011.
Mahindra lost out in the bidding for British luxury carmaker
Jaguar Land Rover to larger Indian rival Tata Motors,
which paid $2.3 billion in 2008 in a landmark purchase that
helped put corporate India on the global map.
While that deal was greeted with scepticism, it has been a
winner for Tata, helping offset slowing sales of Tata-branded
cars and trucks in India and making up about 70 percent of Tata
Motors sales in the June quarter and about 90 percent of profit.
Aston Martin is seen more as a trophy asset, and there are
limited obvious ways to leverage the operational or technical
capabilities of the respective makers of high-performance sports
cars and workaday SUVs and tractors, some analysts said.
"Aston Martin technology is so far beyond anything that
Mahindra is doing at the moment that it's hard to see any
synergies either way," said Ashvin Chotai, managing director of
consulting firm Intelligence Automotive Asia in London.
"The main thing Mahindra would bring to Aston Martin is
money and maybe resources but they're not bringing a lot of
experience," he said.
Shares in Mahindra ended down 3.35 percent on Monday to
close at 922.05 after hitting a record high earlier in the day.
The broader market closed 0.16 percent higher.
"We view this bid with caution as we believe the latter will
require significant investments in R&D and benefits of
technology transfer to M&M's product portfolio is questionable
given little similarity between portfolios," Indian brokerage
Edelweiss Securities said in a research note.
Mahindra has been looking for acquisitions to expand its
portfolio and gain access to new markets.
Earlier this year, it was reported to be interested in
buying at least part of Swedish carmaker Saab Automobile, which
was later bought by a consortium called National Electric
Mahindra is headed by Anand Mahindra, a movie buff who
studied film before earning an MBA from Harvard University.
While Aston Martin may not be expensive, it could require
heavy further investment in research and development.
Costs including research and development and sales account
for about 25 percent of sales at Aston Martin, compared with
12-14 percent at luxury car rivals such as BMW, Jaguar
Land Rover and Daimler, a Barclays report said.
"Large investments could be required to expand product
portfolio and distribution reach," the report said.