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Aston Martin Flotation Might Lead Luxury Spinoffs

Aston Martin Flotation Might Lead Luxury Spinoffs.

“Aston’s listing would help create a distinct class for luxury carmakers. It might even entice other players like Volkswagen’s Porsche to list”.

British luxury sports car maker Aston Martin, the wheels of choice for secret agent James Bond over the years, is getting close to floating on the stock market and investors are salivating.

A recent report from investment researcher Jefferies of London said Aston Martin would lead a string of spin-offs this year including Volvo Cars, Porsche, Alfa Romeo-Maserati, and VW and Daimler’s trucks.

Jefferies said Aston Martin could fetch up to $6.2 billion. In a report late last week Reuters said Aston Martin was closing in on a flotation deal that would raise between $5.6 and $7 billion.

Aston Martin CEO Andy Palmer has already confirmed the company is committed to this future, with the only question being just when would it happen.

Investment researcher Evercore ISI looks forward to Aston Martin being listed because, among other things, it will be directly comparable to Ferrari, the legendary Italian sports car maker floated by Fiat Chrysler Automobiles (FCA), and if successful, might well persuade Volkswagen to consider a similar reorganisation for Porsche, and maybe even a selection of its luxury brands which include Bentley, Bugatti, and Lamborghini.

“In the wake of a potentially lucrative and successful IPO (initial public offering) by Aston Martin, VW’s CEO and board would be foolish, in our view, to ignore the precedent set by two great peer brands, their respective valuations and the benefits afforded to all stakeholders,” said Evercore ISI analyst Arndt Ellinghorst.

Almost as profitable
Ellinghorst said Aston Martin now was almost as profitable as Ferrari, after losing money for some years.

Reuters Breaking Views columnist Lisa Jucca agrees.

“Rich margins and rapid growth should make Aston a close match for the prancing horse,” Jucca said, referring to the famous Ferrari logo.

A stock market quote for Aston Martin also would be another step towards a luxury automaker sector, and create an investment rival for Ferrari.

“Aston’s listing would help create a distinct class for luxury carmakers. It might even entice other players like Volkswagen’s Porsche to list. If investors have more than one to choose from, they might not see Ferrari as such as unique asset. A tougher race would begin,” Jucca said.   

104-year old Aston Martin is owned 37.5% by Italian private equity firm Investindustrial, along with Kuwaiti companies Investment Dar and Adeem Investment and others including Daimler with about 5%.

Not everybody shares this excitement for spin-offs. Citi Research isn’t so sure and reckons the enthusiasm for spinoffs is actually receding.

“Break ups – not for now thanks,” said Citi Research analyst Michael Tyndall in a recent research note.

German hurdle
“It now seems investors are less enthused about the prospect of imminent break-ups. Some of our peers are heavily broking the idea, but as we have pointed out previously co-determination in Germany makes corporate restructuring more complex,” Tyndall said.

Co-determination” in Germany provides equal representation on the boards of directors of workers and representatives of stockholders.

Tyndall said also there is a possibility of capital gains tax liabilities in Germany. Spin-offs can unlock some value, but aren’t a core reason to own stocks.


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