October 06, 2008 | Domain-b.com
Tata Group picks up one-third stake in Piaggio Aero
Indian conglomerate Tata Group will pick up a one-third share of Italy's Piaggio Aero Industries, manufacturer of the Avanti II twin turbo-prop. The proposed investment, to be made by Tata Limited, is expected to receive regulatory and other approvals later on in the week.
It will include purchase of existing shares from current shareholders as well as a new share offering. The terms of the deal remained undisclosed.
The announcement was made at an NBAA press conference.
When the deal is firmed up, the Ferrari and Di Mase families as well as the Abu Dhabi-based Mubadala Development Co, the current main shareholders of Piaggio, will end up holding a third each of the Italian company.
"The future of Piaggio Aero is bright," said Piero Ferrari, chairman, Piaggio Aero Industries. "With the support of world-class investors and strategic partners like Mubadala and Tata Limited, I'm confident we can realize our full potential. We see ourselves as a big company and a big family. This is the most sensible thing we could do."
London, UK-based Tata Limited is the Tata Group's representative in Europe. The 100-year old company has expanded beyond its traditional purchasing activity and offers comprehensive and highly specialised services that cover almost every type of industry and activity.
Under the agreement, Tata Ltd. will have three of the nine seats on the board of Piaggio Aero and one of the three seats on the company's executive management committee.
The increase in share capital will enable Piaggio Aero to expand production capacities, offer the Avanti II in new markets and also develop new aircraft. The Tata connection will also help Piaggio establish a market presence in India.
The P180 Avanti II is Piaggio Aero's flagship product. According to the company it is the world's fastest turboprop business aircraft offering customers the speed of a light jet aircraft.
The aircraft, according to Piaggio, offers the comfort of a large, quiet, mid-size cabin and fuel efficiencies that are nearly 40 per cent higher than most business jets and 25 per cent higher than the most efficient twin turboprops.
Though caught up in a severe downturn, the Indian aviation sector is set to operate 500 airports by 2020, a five-fold increase from the less than 100 as of now.
According to SA Hasan, director of Tata Ltd, "It was the business case that pushed the decision for us. There's a burgeoning market for aviation in India. We can expertly talk of the India market and Piaggio is on the cutting edge of aviation. Tata invests for the long term. As investors, anything we can do to support Piaggio, we will do. We have what it takes to make it work."
Not only is this the first time that Tata Sons are investing in an aircraft manufacturer, but the investment being made by the Group in Piaggio will be the most significant made by it in Italy.
The Tata Group employs about 350,000 people worldwide and has reported a collective revenue of $62.5 billion for 2007-2008. The Group owns premium brands such as Jaguar, Land Rover as well as Tetley Tea and European steel giant Corus.
Mubadala's sole shareholder is the Abu Dhabi government.