A private equity firm could turn from seller to buyer
Thursday 04 Jul 2019 Author: Steven Frazer

Italian private equity house Investindustrial is on the verge of taking the unusual step of rebuilding its stake in prestige sports car maker Aston Martin Lagonda (AML).

The specialist buyout firm has launched a bid to buy a 3% stake owned by Kuwaiti-based investors listed as Primewagon, Adeem Automotive and Asmar on the shareholder register.

An offer of £10 per share has been offered and accepted via a partial offer arrangement.

Investindustrial and the Kuwaiti backers were the owners of Aston Martin when it was bought to the stock market in October 2018. Both investors sold substantial stakes in the initial public offering (IPO), priced at £19 per share, but also retained 31% and 36% shareholdings respectively at the time.

This deal, if confirmed, would effectively allow the Kuwaiti backers to further reduce their shareholding – having already been selling since the IPO – to approximately 27%. What is more surprising is that Investindustrial is doing the opposite and rebuilding its investment in the UK marque sports car brand.

People close to Aston Martin have told Shares that this is an illustration of the longer-term value the private equity firm sees in the stock after a dismal post-IPO share price performance.

Since listing the shares have slumped dramatically, plunging to an 818.8p low in May as concerns escalated over Brexit and the free flow of car components to and from Europe.

Aston Martin must also juggle massive investment for growth versus weakening profits and threadbare underlying cash flows despite selling more cars than ever.

Normally this sort of share deal would trigger an automatic bid for the entire business under UK Takeover Panel rules. That happens when an investor wants to buy more stock that would take them over the 30% stake threshold. However, Investindustrial is operating under a Takeover Panel waiver agreed at the time of the IPO, which explains why it will be allowed to increase its stake from 31% to 34%.

The partial offer is open to all shareholders, including retail investors, and will be arranged on a pro-rata basis if investors beyond the Kuwait backers accept. Aston Martin will produce an offer document in the coming weeks.

Shares has previously been negative on the stock and our stance doesn’t change as a result of Investindustrial seeing value at the current price.

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