Kuwaiti investors weigh up their future bond to Aston Martin
Andy Palmer, the affable chief executive of Aston Martin, called the forthcoming initial pubic offering (IPO) of the famous British car company a “monumental moment” in its 105-year history.
Quite right. For a company that in many ways mirrors the past century of British engineering — heavy on style and invention, light on financial acumen — the prospect of a £5 billion ($6.5 billion) valuation and a possible place in the FTSE 100 index of London’s elite is a real triumph.
Aston has gone bust seven times in its history, but has always come back with a product to catch the fancy of a forty-something male petrolhead with an eye for style and glamor. Its best bit of marketing came when film makers put the dashing spy James Bond behind the wheel of an Aston Martin DB5.
Bond may have strayed to other car marks from time to time, but he always came back to Aston. And Aston has played the relationship for all it is worth — in a subtle, stylish way, of course.
But if the forthcoming IPO is a testimony of the staying power of the brand, it is also a monumental moment for an Arabian Gulf investment house that has stuck with Aston through thick and thin.
In 2007, the British company was, once again, in serious trouble. Its American owner Ford had had enough, after 15 years of subsidizing Aston losses, and the threat of bankruptcy loomed.
Into the breach stepped Kuwaiti investors, leading an international group of investors that pumped millions into the British manufacturer, as much in hope and enthusiasm for the brand as in any long-term expectation of getting a serious return.
The Kuwaiti investors stuck with Aston even in the perilous days of the global financial crisis when its own existence was under threat and it looked as though it would have to offload the Aston stake just to survive.
They and another big investor, the Italian financial firm Investindustrial, were instrumental in the decision to bring in Palmer from Nissan in 2014, and to give him the freedom and resources to develop a new strategy that would get Aston permanently out of the boom-bust cycle. The result was the “second generation” plan Palmer put in place, and in which the IPO is the logical next step.
Aston has gone bust seven times in its history, but has always come back with a product to catch the fancy of a forty-something male petrolhead with an eye for style and glamor. Its best bit of marketing came when film makers put the dashing spy James Bond behind the wheel of an Aston Martin DB5.
Frank Kane
Palmer had come to the conclusion that Aston’s troubles in the past stemmed from the fact it spent heavily on developing new models but failed to look beyond the next glamorous launch. The DB9, for example, wonderful car though it was, did not generate sufficient return to justify the big initial outlay, nor to fund the next model.
So he put in place a rolling schedule of new models across a wider product range. Not just sports cars for Bond-wannabes, but SUVs for the family man or woman, and electric vehicles for the environmentally conscious.
The theory is that a broader product range will give the manufacturer bigger and more sustainable revenue for future development, enabling a virtuous investment circle for probably the first time in its history.
It’s too early to conclude that this strategy will pay off in the long term, but the signs are good. Just last month Palmer confirmed Aston’s return to profitability with the seventh consecutive quarter out of the red, with soaring demand for the DB11 around the world, but especially in Asia.
Bigger sales outside the UK, Europe and US, including the car-crazy Middle East, are very much a part of the future strategy.
Whether all this adds up to a £5 billion valuation remains to be seen. Some analysts have called that figure demanding, based on the comparatively low rating the stock markets puts on car firms.
Aston responds that it is not just any old car firm, and deserves a rating more in line with the high valuation the market puts on New York listed Ferrari, the only other stand-alone luxury car maker with an exchange listing.
Investors will be in a better position to judge in the next week or so, when banks advising Aston are due to come out with a more detailed prospectus for the listing, with further financial details and a potential price range for the shares.
Whatever the eventual value, the IPO will be the chance for the Kuwaiti investors to take some profit on its commitment to Aston, though it is not likely to sell its entire holding. The extent of the Kuwaiti’s ongoing commitment will tell potential investors a lot about the potential for Aston’s second century, and Palmer’s strategy.
• Frank Kane is an award-winning business journalist based in Dubai. Twitter: @frankkanedubai
