Four years after it failed in its bid to buy luxury car brand Jaguar and Land Rover, M&M is ready to go shopping once again. And this time, it is learnt to have set its eyes on Aston Martin, the car made famous by James Bond. CNBC-TV18's Ronojoy Banerjee and Sunanda Jayaseelan find out whether financially, this deal will give Anand Mahindra any quantum of solace.
James Bond may have immortalised the Aston Martin as he fought for Queen and country. But the iconic brand may have an Indian owner soon, if Anand Mahindra has his way.
In 2007, a consortium led by Kuwaiti investment firm The Investment Dar or TID bought the brand for an enterprise value of USD 800 million and TID got a near-50 percent stake.
Now CNBC-TV18 learns that M&M's bid puts the enterprise value of the brand at a little over one billion dollars, with the equity stake alone valued at USD 561 million. (Read: M&M hopes for quick Aston Martin deal)
So M&M will shell out nearly USD 282 million for a 50 percent stake, and take charge of an additional USD 480 million in debt. Now as of March 31, 2012, M&M had cash reserves of nearly USD 200 million.
What's troubling analysts about M&M bidding for Aston Martin, is that the SUV-makers last 2 acquisitions -- Ssangyong and Kinetic -- are yet to pay their way. Especially after M&M lowered its CY12 sales guidance for Ssangyong from 123,000 vehicles to 120,000 vehicles citing difficult market conditions in Korea and Western Europe.
Aston Martin, meanwhile, is a private company with limited financial information in the public domain. But Analyst reports indicate that its revenues in CY11 rose 7 percent to USD 812 million dollars and EBITDA declined by 18 percent in CY11 to 121.76 million. Aston Martin also has a debt burden of nearly USD 480 million dollars, maturing in 2018.
Analysts say that if M&M does go through with this deal, it will be staring at a Consolidated EPS loss of Rs 10 per share and an earnings impact of between Rs 100 and Rs 150 per share.
M&M's interest in the brand, however, makes some sense. While M&M leads in the Utility Vehicle space with a market share of 32 percent, it has not managed to really break into the car segment.
Aston Martin may not be an unwilling bride either. Its engine contract with Ford comes to an end in 2013, and talks with Daimler have not made much progress. And when it comes to investing in R&D, it cannot keep up with rivals like BMW, which will pump in USD 1.3 billion over the next few years, or JLR, which will pump in over one billion dollars.
M&M and Aston Martin refused to comment on this story and TID has categorically denied it, saying it is not negotiating any stake sale in Aston Martin.