India’s Tata buys one-third stake in Piaggio Aero

 - October 5, 2008, 4:05 PM

 India’s Tata Sons, has agreed to buy a one-third share of Italy’s Piaggio Aero Industries, manufacturer of the Avanti II turboprop twin.

Announced to the financial press on Thursday and at an NBAA press conference yesterday, the proposed investment by Tata Ltd., which is expected to receive regulatory and other approvals later this week, includes the purchase of existing shares from current shareholders and a new share offering.

The Ferrari and Di Mase families and the Mubadala Development Co. of Abu Dhabi, UAE, the current primary shareholders of Piaggio, will also hold about one third each of the Italian company when the deal is finalized.

“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.”

He explained that he had met Ratan Tata, chairman of Tata Sons, “when Ratan was looking to buy a Ferrari. I told him about Piaggio and he became very interested. He is very interested in aviation and is a pilot himself. I personally want to thank Ratan for investing in our company.”

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, not disclosed, will enable Piaggio Aero to expand production rates, offer the Avanti II to new markets and develop new aircraft.

The addition of Tata will help Piaggio establish a market presence in India, where the government plans to develop 500 operational airports by 2020. Today there are fewer than 100.

S.A. Hasan, director of Tata Ltd., said, “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.”

This is both the first time that Tata Sons has invested in an aircraft manufacturer and its first significant investment in Italy. The Tata Sons business group comprises 27 publicly listed companies that have expected collective revenue of $62.5 billion for 2007-2008, employs about 350,000 people worldwide and has 3.2 million shareholders. Sixty-one percent of its business comes from outside India.

According to Hasan, India’s Tata family owns less than 3 percent of Tata Sons, while 66 percent of the group’s revenue goes to trusts that fund social causes, community projects and academic institutions. Jamsetji Tata founded the company in 1868. Tata also owns luxury car brands Jaguar and Land Rover.

Mubadala, established in 2006, bought a 35-percent stake in Piaggio Aero in April 2006 and also holds 5 percent of Ferrari. Mubadala’s sole shareholder and source of capital is the Abu Dhabi government. Homaid Abdulla Al Shemmari, associate director of Mubadala, said yesterday that the goal of his company is to establish an aerospace engineering and manufacturing base in Abu Dhabi.

Piaggio is exhibiting at Booth No. 299 and at the static display is showing a new Avanti II.