Aston Martin Is Taking on Ferrari. The Two Could Have Been One

(Bloomberg) -- Aston Martin has set an ambitious goal for its initial public offering this week: to earn a higher valuation than Ferrari NV. If events had turned out differently a few years ago, the British carmaker could have ended up part of its Italian rival.

Investors in Aston Martin, whose sports cars were made famous in the James Bond movies, made informal approaches to Ferrari about a deal soon after Sergio Marchionne took the reins at the Italian super-car maker in late 2014, said people familiar with the discussions. Ferrari reviewed a potential acquisition as a way to expand beyond high-performance cars and attract new customers, said the people.

Ferrari decided not to pursue a deal, choosing instead to develop internal plans to expand its line-up with four-seat sedans like the GT4 Lusso and its first ever sport utility vehicle, now planned by end of 2022, said the people, who asked not to be named because the matter was confidential. The Maranello, Italy-based company was spun off by Fiat Chrysler Automobiles NV in an IPO on the New York Stock Exchange in October 2015.

Had Ferrari decided differently, one of the most-watched IPOs of 2018 never would have happened, and investors wouldn’t have had a chance to invest directly in Aston Martin. Spokespeople for Ferrari and Aston Martin declined to comment.

In its meeting with investors before its IPO, Aston Martin sought to lure fund managers by focusing on the company’s scarcity value -- there are few publicly traded makers of high-end sports cars to invest in -- and it used Ferrari’s valuation as a benchmark, the people said.

The British carmaker, which will debut Wednesday on the London Stock Exchange, said investors in the IPO should be prepared to pay 19 pounds a share or risk losing out on the deal, according to terms obtained by Bloomberg. The figure, below the top end of the range that the company had been targeting, would value Aston at about 20.7 times profit, based on first-half results.

The calculation doesn’t take into account Aston Martin’s debt and research spending, which would push the multiple higher. Ferrari trades at about 21 times expected adjusted profit for 2018, based on Bloomberg data -- a figure that’s closer to luxury good companies than to carmakers. Ferrari, which has a market value of about $26 billion, has almost tripled since its market debut.

One of Aston Martin’s key shareholders, Investindustrial, is well known to Ferrari. Its Italian boss, Andrea Bonomi, is a car guy who used to have regular discussions with Marchionne, the Fiat Chrysler CEO who died in July.

Investindustrial won the license for the Ferrari Land theme park in Spain, which opened in 2017. The park includes attraction like the Red Force that gives a flavor of the company’s cars by propelling riders to 180 kilometers (110 miles) per hour in five seconds.

Marchionne, on a Fiat Chrysler earnings call last year, indicated that he and Bonomi had discussed Aston Martin’s future and whether it had the scale to thrive as a standalone company.

“The real question about Aston is not about its timing and its positioning as an automaker,” Marchionne said then. “It is what is the technical offering that Aston Martin has going forward. Can it do it on its own, does it need a partner to get it done? These are questions that are relevant. And I’ve had this conversation with Andrea Bonomi over at Aston Martin.”

Even with the lowered IPO price, Aston Martin’s IPO marks a dramatic win for its shareholders, who are set to reap a 10-fold increase in less than a decade. When Investindustrial bought a 37.5 percent stake in 2012, the carmaker was valued about 400 million pounds, Aston Martin Chief Executive Officer Andy Palmer said in an interview last month.

A sale at 19 pounds would value Aston Martin at 4.31 billion pounds, about 15 percent less than its initial maximum target.

Bonomi, who owned motorbike maker Ducati before selling it to Volkswagen AG in 2012, will keep a stake in Aston Martin after the IPO. Investindustrial will likely remain Aston Martin’s biggest investors after the listing, with a 30.9 percent stake, according to the IPO prospectus.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net;Benjamin Katz in London at bkatz38@bloomberg.net

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Phil Serafino

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