Tech Mahindra and Mahindra & Mahindra to buy Italian car designer Pininfarina

Tech Mahindra and Mahindra and Mahindra , an associate of Mahindra Group, have agreed to buy Italian car designer Pininfarina S.p.A, an iconic Italian brand in automotive and industrial design. The acquisition would be financed in an all-cash deal. However, the total deal size is pegged at around Euro 165 million.

Pininfarina is credited with designing Ferrari's first model. It has also designed cars for Ferrari, Maserati, Rolls-Royce and Cadillac, Alfa Romeo Spider, Fiat Chrysler, Hyundai Motors and Ford. Pininfarina’s superior designs have long been copied by others.

The acquisition will give Mahindra access to the host of high-end styling and engineering services provided by the Italian company in different segments like automobiles, aerospace,architecture,industrial design etc, while Pininfarina will benefit from an ability to leverage Tech Mahindra’s presence across 90 countries and access to about 780 customers – the aim is to upsell and cross-sell to the combined client base that will now be available to both the sides.

Mahindra’s decision to buy the 85-year-old design firm is a modest investment by auto-industry standards but strategically important for a company already owning an array of auto assets in the South Korean automaker Ssangyong Motor and France-based Peugeot's scooter business. Mahindra’s have a reputation for buying undervalued and loss making business with potential to deliver long-term gains and turning them around. The purchase of the Italian design house would provide instant admiration for the brand and the company in an all important European and US markets.

Under the terms of agreement, Tech Mahindra and M&M shall purchase 76.06 per cent of Pininfarina shares from the current controlling shareholder Pincar S.r.l. at a price of Euro 1.1 per share. This investment by Tech Mahindra and M&M shall be done via a joint venture (i.e creation of a Special Purpose Vehicle) company ("JVCo"), whose ownership shall be held 60 per cent by Tech Mahindra and 40 per cent by M&M. It will then be followed by an open offer for the remaining 23.94 per cent at the same price. Mahindra will also inject Euro 20 million into the designer through a rights issue of new stock, and will provide a guarantee worth up to Euro 114.5 million to its lenders, creditors and lessors.

According to a statement, Pininfarina will continue to remain an independent company, listed on the Milan Stock Exchange, with Mr Paolo Pininfarina continuing as the Chairman of its board.

Global auto majors have aggressively been buying smaller firms in the hopes of better competing with its existing rivals by adding more technology driven product & solutions. Auto companies are also preparing themselves from innovative and technology driven new entrants such as Google, Apple etc. In a spurt of deals, Pininfarina is the latest Italian luxury brand to be snapped up by a foreign buyer primarily Chinese and Indian.