Mahindra & Mahindra Shows Interest In Ferrari Designer Pininfarina

Mahindra & Mahindra (M&M), India's largest maker of sport-utility vehicles, is in talks to buy Italian auto design and engineering company Pininfarina SpA, according to people familiar with the matter. If the deal goes through, this would be the third Italian company to be acquired by an Asian company. Pininfarina was founded in 1930 and has designed automotive classics like the Ferrari 250 GT and Alfa Romeo Giulietta Spider from the 1950s.Pininfarina cooperates with Mumbai-based Mahindra on SUV development and worked with the Indian company on the Halo electric sports-car concept presented at the Delhi auto Expo 2014.

Crucial Aspects for the Companies in the Deal:

• The Turin-based company has posted losses in 10 of the past 11 years as it struggled with debt and a floundering business to manufacture cars for other companies.
• This year has been a bit better for Pininfarina as the share prices have gone up by 21 percent which has raised the company’s value to $135 million (Rs. 840 crores). If the deal gets through, then this would be the third company after Benelli and Pirelli to be acquired by an Asian company
• The main reason for this has been that car manufacturers have started hiring in-house designers as it works out to be cheaper for them.
• Companies net debt stood at 45 million euros at the end of 2014 and is expected to rise this year.
• Any deal with Pininfarina would need the backing of its controlling shareholder Pincar - which has a 76 percent stake in the group - and of its 13 creditor banks.
• Pincar's stake has been put up as collateral for the banks' financing, and a 2008 debt        restructuring agreement with creditors envisages the possible sale of the company.

Mahindra has earned a reputation for buying distressed, undervalued companies. In 2010, it bought troubled South Korean automaker Ssangyong Motor and last year it acquired a majority stake in France-based Peugeot’s loss-making scooter business.Pininfarina has been designing residential buildings, vending machines and toothbrushes apart from cars off late. The acquisition will help Mahindra design better cars and will also help it in designing its residential projects under Mahindra Lifespaces.

References: Thomson Reuters