Diversified industrial group Mahindra has inked an agreement to buy majority stake in Italian car designer and engineering services firm Pininfarina S.p.A as it seeks to strengthen the engineering vertical for its IT company, it said on Monday.
Pininfarina designs cars for BMW, Ferrari, Alfa Romeo and even Mahindra's own automotive unit under M&M. The Milan Stock Exchange-listed firm had revenues of €86.6 million with EBITDA of €7 million in 2014 and has been growing its top-line for the past few years consistently.
The deal that has been in the works for a long time involves a special purpose vehicle (SPV) owned by the group's two key listed firms—Tech Mahindra and the flagship Mahindra & Mahindra—buying majority stake in Pininfarina and pump in further cash into the firm.
Anand Mahindra, chairman of the Mahindra Group, said, "Pininfarina will add enormous value to Tech Mahindra's portfolio of engineering services. But just as important is the fact that the legendary high-end design credentials of Pininfarina will significantly enhance the design capabilities of the entire Mahindra Group.”
Tech Mahindra will own 60 per cent stake in the SPV with M&M owning the rest.
"Adding Pininfarina's legendary design skills to our integrated engineering solutions enables a strong entry into automotive styling, design and development and reinforces our body engineering capabilities. Further, Pininfarina's design expertise in industries beyond automotive will give us that winning edge in areas such as aerospace, consumer electronics, architecture and interiors and transportation where we already have a strong footprint," said CP Gurnani, CEO and managing director, Tech Mahindra.
In the first leg, the SPV will acquire 76.06 per cent for €25.3 million in cash from its promoter Pincar. It would make an open offer to public shareholders of Pininfarina to buy the rest at the same price per share cumulating around €33.2 million ($36.5 million).
Thereafter Mahindras will put in €20 million ($22 million) into the firm through a rights issue. The SPV has also entered into an agreement with lenders of the Italian firm to restructure the existing debt and will provide a corporate guarantee of up to €114.5 million ($126 million).
Pininfarina will continue to remain an independent company, and depending on the success of the open offer, may remain listed on the Milan Stock Exchange, with Paolo Pininfarina continuing as the chairman of its board.
Pininfarina was founded by Battista Pinin Farina in 1930. Farina designed the first Ferrari, the 212, followed by the tremendously popular 250 GT. It has designed almost 1,000 cars across brands over the years.
It has also designed high-speed trains, buses, trams, rolling stocks, automated light rail cars, people movers, yachts, airplanes and private jets. In addition, Pininfarina consults on industrial design, interior design, architecture and graphic design.
Paolo Pininfarina, chairman of Pininfarina S.p.A. added, "Tech Mahindra's global presence and delivery model will allow us to compete for a larger pie of the business."