The Mahindra Group, through its subsidiaries Tech Mahindra Limited and Mahindra & Mahindra, has just finalized a deal to secure a controlling stake in Pininfarina S.p.A., considered as one of the most revered automotive and industrial design houses in the world. Financial aspects of the deal have yet to be disclosed, but according to a statement released by the Indian conglomerate, Tech Mahindra and M&M will receive 76.06 percent of Pininfarina shares from incumbent shareholder PincarS.r.l. at a price of € 1.1 per share. The transaction and subsequent transferring of shares will be received by “JVCo”, a joint venture company between Tech Mahindra and M&M. 60 percent of the new company will be owned by Tech Mahindra with the remaining 40 percent going to M&M.

Once the transaction is completed, an open offer for the remaining ordinary shares of Pininfarina will commence. The open offer will come at the same purchase price paid for the shares that are held by Pincar. Likewise, a rights issue to infuse funds into the company is also expected to take place by the end of 2016.

The deal to acquire controlling interest in Pininfarina may seem odd on the surface given the different markets the companies are in. But such is the case in business. We’ve seen something happen like this before and we’ll see it again. For Tech Mahindra, being in the fold allows it to tap into the iconic Italian designer’s expertise in product conceptualization, as well as its design and outfits, which is regarded as one of the best in the world. Pininfarinar’s long-standing relationships with some of the finest marquees in the auto industry also gives Tech Mahindra a new avenue to pursue in the event it decides to embark on that possibility.

Despite ceding a majority of its shares to Tech Mahindra and M&M, Pininfarina will continue to operate as its own company. It’s listing at the Milan Stock Exchange will also remain active and the company’s management team, led by chairman Paolo Pininfarina, will continue to serve in its capacity.

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Why it matters

As I said, it’s an unlikely partnership at first glance, but when you really dive deep and dissect the benefits both companies stand to get, the more it becomes clear that this is actually a really good deal for both Tech Mahindra and Pininfarina.

For Tech Mahindra, having Pininfarina in the fold allows it to expand its automotive and design businesses well past its current reach. That’s important for a company that has ambitions of becoming a bigger player in the market. It gains access to a part of the auto industry that it didn’t have before and in doing so, it can tap into Pininfarina’s long-standing presence in Europe, specifically in Italy and Germany, as well as the U.S. and Chinese markets. If the company is really serious about expanding its proverbial tentacles, this partnership with Pininfarina will go a long way in accomplishing that.

In a lot of ways, Pininfarina stands to gain the same benefits as Tech Mahindra, albeit through different means.Sure, there’s that part about expanding its own presence across 90 countries and utilizing Tech Mahindra’s global delivery model, making its products more accessible to a bigger group of people. But, there’s also the benefit of being able to utilize the Indian congolomerate’s other businesses. Think about the scale of production Pininfarina can do now and compare to what it can do with the backing of Tech Mahindra. Having a company with the financial resources to support your business could only lead to bigger and better things for the Italian design house.

I’m personally excited to see what this partnership can do in the coming years. Considering what both can bring to the table, I fully expect to see Pininfarina become a bigger presence in the automotive world. Likewise, Tech Mahindra, if it chooses to, can tap into Pininfarina’s expertise to help improve its current crop of automotive offerings. It’s a win-win scenario for both brands and from the looks of things, this partnership could be the catalyst that helps inspire a brighter future for the two sides.

Is it too early to get excited over what comes next for Mahindra and Pininfarina?

Press Release

Tech Mahindra Limited, a leading provider of IT, Networks and Engineering solutions and BPO services, and Mahindra & Mahindra, part of the global $ 16.9 billion Mahindra Group, have jointly entered into an agreement with PincarS.r.l., to purchase a controlling stake in Pininfarina S.p.A., an iconic Italian brand in automotive and industrial design.

Pininfarina’s legendary brand status will allow Tech Mahindra powerful access to relationships the iconic designer has nurtured with the best in the world over its 85-year history, including with Ferrari, Alfa Romeo, Maserati and Peugeot. This will mean an opportunity for Tech Mahindra to influence product conceptualization and design & styling through Europe’s best-in-class design house.

Terms

As part of the agreement, Tech Mahindra and M&M shall purchase 76.06 % of Pininfarina shares from the current controlling shareholder PincarS.r.l. at a price of Euro 1.1 per share. This investment by Tech Mahindra and M&M shall be done via a joint venture company ("JVCo"), whose ownership shall be held 60 % by Tech Mahindra and 40 % by M&M.

This will be followed by an open offer for all the remaining ordinary shares of Pininfarina, at the same purchase price paid for the shares held by Pincar. A rights issue to infuse funds into the design & styling major will also be executed before the end of 2016.

Pininfarina will continue to remain an independent company, listed on the Milan Stock Exchange, with Mr Paolo Pininfarina continuing as the Chairman of its board.

World of Design

Where Customer eXperience determines the future of business, this acquisition will give Tech Mahindra a critical foothold in key, early-stage conversations in the automotive and other verticals. Tech Mahindra will also benefit from the designer’s focused presence in Italy and Germany, the hotbeds of European automotive manufacturing, as well as in the US and an emerging automotive market, China.

For Pininfarina, the acquisition will mean an ability to leverage Tech Mahindra’s presence across 90 countries and access to about 780 customers. Tech Mahindra’s global delivery model will lend Pininfarina a newly heightened scale to its operations.

Reinforcing Tech Mahindra’s vision of a world of Connected Solutions, this combine will enable a strong entry into automotive styling, exclusive vehicles design & development and reinforced body engineering capability. It also augments Tech Mahindra’s Transportation, Aerospace & Industrial Design offerings. The synergy will help the duo cross-sell and up-sell their services to existing clients and help attract new ones.

More from the P-I-E

Pininfarina’s philosophy of Purity, Innovation and Elegance will find a perfect fit with Tech Mahindra’s world of connectedness – where design & styling will, hand in hand with engineering services, go after a larger market.

Tech Mahindra’s well-entrenched Integrated Engineering Solutions (IES) business will complement Pininfarina’s range of offerings. It is now equipped to pursue bigger opportunities in the outsourced Automotive Engineering Services industry that totals around USD 10 Billion with a CAGR of 8 per cent. The IES offering will be able to compete better with traditional western players, with styling, design and prototyping.

Brand with a History

Pininfarina is a styling company best known for its stunning designs of famous car brands – including Ferrari, GM, Peugeot and the Alfa Romeo. Started 85-years ago by founder Battista ’Pinin’ Farina, the company is the Italian symbol for jaw-dropping car designs. It has designed almost 1,000 cars across brands over the years.

The company’s enduring relationship with Ferrari began when ’Pinin’ Farina and Enzo Ferrari met in 1951. Farina designed the first Ferrari, the 212, followed by the tremendously popular 250 GT. Farina’s breath-taking designs took Hollywood by storm, too, inspiring the film ’Sabrina’ starring Audrey Hepburn, William Holden and Humphrey Bogart, along with the Spider that Farina designed.

Mr. Anand Mahindra, Chairman of the Mahindra Group, commenting on Pininfarina joining the Mahindra family, said, "Pininfarina will add enormous value to Tech Mahindra’s portfolio of engineering services. But just as important is the fact that the legendary high-end design credentials of Pininfarina will significantly enhance the design capabilities of the entire Mahindra Group. Given the increasing design sensibilities of today’s consumers, product design will greatly influence customer choice and experience, and hence our success”.

"Our clients want more from us, consistently. Adding Pininfarina’s legendary design skills to our Integrated Engineering Solutions enables a strong entry into Automotive styling, design & development and reinforces our body engineering capabilities. Further, Pininfarina’s 25-year design expertise in industries beyond Automotive will give us that winning edge in areas such as Aerospace, Consumer Electronics, Architecture & Interiors and Transportation where we already have a strong footprint," according to CP Gurnani, CEO & Managing Director, Tech Mahindra. Paolo Pininfarina, Chairman Pininfarina S.p.A. added, "In a globalized world, entrepreneurship and capital do not need a passport. We are joining hands with a $ 3.9 Billion Technology & Global partner, and part of the $ 16.9 billion global Mahindra Group, which will not only strengthen our Italian identity but will open more doors. Tech Mahindra’s global presence and global delivery model will allow us to compete for a larger pie of the business."

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