British rallying company hopes Kuwaiti investment will jump start its fortunes

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The Independent Online

The Kuwaiti Investment Dar Company (IDC), which owns luxury marque Aston Martin, is set to take a stake in Prodrive, the Oxfordshire motor sport and engineering business, according to documents filed by the company.

The Kuwaitis are believed to have the option of buying as much as 40 per cent from Prodrive's founder, the former rally driver David Richards.

In March last year, Richards spearheaded the £479m purchase of Aston Martin by IDC, whose arrival at Prodrive comes in the wake of Apax, a private equity house, recently selling its 56 per cent stake which it bought in 1999 for £35m. After a disastrous 2007 for Prodrive, Apax offloaded its shares on to Richards in December because it was not making strong enough returns on its investment.

Prodrive had been planning to enter Formula One this year but it failed to find a chassis and engine supplier.

The company makes limited edition cars for manufacturers such as Ford and Mazda but its heritage is in rallying. It runs the Subaru team and has won six world rally championships taking its first title in 1995. However, it now faces a rockier road.

The F1 outfit was to be based at a new Warwickshire plant which would create 800 jobs but this faced planning permission problems. Prodrive currently employs nearly 1,000 staff and their total pay of £27m is one of the company's biggest overheads. In contrast, accounts show that in 2006 it spent just £130,000 on its aborted F1 bid. However, the £2.8m after-tax profit in 2005 still reversed into a £7.5m loss.

This was mainly driven by a fall in vehicle and engine sales as well as the loss of a lucrative contract managing the Honda F1 team which Prodrive ran until the end of 2005. This sent turnover tumbling by £7m to £104m and the shareholders' funds were cut in half to £8m.

The Kuwaitis specialise in banking, finance and real estate investments and Aston Martin was its first automotive acquisition. Prodrive took a modest stake in the marque and Richards was its non-executive chairman. Prodrive had been running the Aston Martin sports car team since 2004 and has won in its category several times at the Le Mans 24 hour race.

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