LONDON, 28 May 2007 — Lawyers and bankers in London are putting the final touches to one of the more unexpected acquisitions done by a consortium led by two Kuwaiti Islamic financial institutions, The Investment Dar (TID) and Adeem Investment — that is buying a majority 87.5 percent stake in the iconic Aston Martin Car Company, based at two factories in the UK — one at Gaydon in Warwickshire, and the other at Newport Pagnell in Buckinghamshire.
“We have signed an agreement with Ford Motor Company for TID and the consortium to buy an 87.5 percent stake in Aston Martin. I can’t say anything more about the deal because it is in the hands of the lawyers. We would not like to jeapordize the deal. I think it would take perhaps another month or two to finalize the deal,” Adnan Al-Musallam, Chairman and Managing Director of TID to Arab News.
The consortium brings together TID, Adeem and two British entrepreneurs David Richards and John Sanders. Richards, 54, a former accountant, is the founder of Prodrive, the group that runs Aston Martin’s racing team. He is also the former head of the BAR Honda and Benetton formula one teams.
Investment funds from the GCC have been diversifying into the European Union through acquiring assets in Britain including Madame Tussauds, P&O, and Veridian, the main electricity supplier in Northern Ireland. At the same time, Dubai International Capital has acquired a $1bn stake in DaimlerChrysler; and Abu Dhabi’s Mubadala Development Co a 5 percent stake in Ferrari.
However, it is Islamic financial institutions (IFIs) that are setting the pace through innovative acquisitions in private equity deals. Kuwait Finance House acquired and sold Malin Holdings, the company that owns the Swedish Post office mail sorting houses; Arcapita has bought a big stake in Shurgard Self-storage Company, and further stakes in a water utility and wind energy company in the UK and a logistics and distribution company in Germany.
Aston Martin is of course the glamorous mode of transport preferred by celluloid British secret agent, James Bond, codenamed 007, and the envy of millions of young men around the world. There are also reports that senior executives of the consortium companies are all members of the Aston Martin Owners Club.
The good news is that Aston Martin is a debt-free company. This makes it easier for an IFI to acquire. “This is one of the strengths of this deal, and especially for our future strategy fund the expansion of Aston Martin. Regarding the financing, the total transaction is worth just about 479 million British pound, of which 60 percent is being financed through equity and the remaining 40 percent through a Murabaha facility,” TID’s Al-Musallam said. The London branch of WestLB has been awarded the mandate to raise the 225 million British pound financing facility.
The new buyers are adamant that the car will continue to be manufactured out of the UK. “As you know, we are investors. We are from outside the company. Manufacturing and the running of the companies will be totally left to the management. In all our acquisitions in the past, we came to help and boost the management. We do not interfere in the day-to-day business, unless there is something which pushes us to do so,” stressed Al-Musallam.
The investment in Aston Martin is purely for good business reasons. The consortium did its due diligence and saw Aston Martin as an attractive opportunity. The fact that the company had no debt was a major factor especially for the IFIs, which conduct their business only on Islamic financial and investment principles. In this respect, assuming the deal goes through, Aston Martin would effectively be a Shariah-compliant company, and should the owners at a later stage part list it on the stock exchange, it would qualify as a Shariah-compliant stock to be included in equity indexes such as the Dow Jones Islamic Market European Index or the FTSE Islamic Europe Index.
“When you look at the investment, everyone knows that Aston Martin is a top-of-the -line company. The present management has done a very good job — the company use to sell 800 units back in 2000; by 2006 the company sold over 7,000 units. The management have done a tremendously good job in turning around the company,” explains Al-Musallam.
The main markets for Aston Martin are the US, UK and Europe. They currently dominate 90 percent of sales. According to Al-Musallam, the aim is to expand exports to new markets such as the Middle East, Southeast Asia, China, India and Russia — all ripe for the iconic luxury sports car.
The Investment Dar Company is one of the fastest growing Islamic financial institutions (IFIs) in the GCC and focusing on real estate and consumer finance business. At end-December 2006, TID had an average market capitalization of $3.35 billion. At end-June 2006, TID had total assets of $2.938 billion and shareholders’ equity of $880 million. According to Al-Musallam, 2006 has been a very good year for the institution. Equity surpassed $1 billion, the balance sheet assets are in excess of 1 billion Kuwaiti dinar and net profits totaled $300 million.
It currently enjoys an issuer rating of A- from ICRA, the Asian affiliate of Moody’s; and a long-term rating of BBB assigned by Cyprus-based Capital Intelligence, which specializes in emerging market ratings.
Last year, TID mandated the London branch of WestLB and Unicorn Investment Bank of Bahrain to lead arrange a $150 million Sukuk, the proceeds of which were being used for general corporate purposes.
