India's Mahindra to buy Italian car designer Pininfarina at sharp discount

MUMBAI/TURIN (Reuters) - India's Mahindra group, with interests from tractors to IT outsourcing, has agreed to buy Italy's Pininfarina SpA PNNI.MI in an all-cash deal valuing the Turin-based car designer at just a quarter of its closing price on Friday.

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Pininfarina, which has designed cars for Ferrari, Maserati, and Rolls-Royce, is the latest Italian industrial brand to be snapped up by an Asian buyer. In March for instance China National Chemical Corp agreed to buy into tyre maker Pirelli & C SpA PECIn.MI in a 7.3 billion euro deal.

Under the agreement announced on Monday, automaker Mahindra & Mahindra Ltd MAHM.NS, together with its IT outsourcing arm Tech Mahindra Ltd TEML.NS, will buy 76.06 percent of Turin-based Pininfarina from holding company Pincar at 1.1 euros per share for 25.3 million euros ($28 million).

It will then make an open offer for the remaining 23.94 percent at the same price.

Pininfarina shares, which closed on Friday at 4.2 euros, slumped 69 percent to 1.31 euros. The stock had traded as high as 6.29 euros as recently as April.

“You have to bear in mind that under this deal the company will be recapitalised and will have better growth opportunities,” Pininfarina CEO Silvio Angori told reporters.

The Italian company has been loss-making for years, partly because carmakers have brought design in-house rather than hire independent design firms.

Mahindra will also inject 20 million euros into the designer through a rights issue of new stock, and will provide a guarantee worth up to 114.5 million euros to its lenders, creditors and lessors, the company said.

Pininfarina, which owes its name to the nickname of its founder Battista Farina, known as “Pinin” Farina, had net debt of 47.4 million euros at the end of September.

The deal is expected to close in the first half of 2016.

Mahindra first approached Pininfarina at the beginning of this year, but has links with its target going back to 2013, when the Indian company hired Hubert Tassin, a former Pininfarina designer.

Mahindra has a reputation for buying undervalued companies. In 2010, it bought troubled South Korean automaker Ssangyong Motor, and last year it acquired a majority of France-based Peugeot's PEUP.PA loss-making scooters business.

($1 = 0.9079 euros)

Additional reporting by Devidutta Tripathy and Zeba Siddiqui; Writing by Stephen Jewkes; Editing by Jane Merriman and David Holmes