m&a of Tatamotors and Jaguars

7/28/2019 m&a of Tatamotors and Jaguars

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By:

Babita Sharma: 08(SR)Bansi Pandya:11(IT)

Shreeti Daddha: 09(SR)


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Mergers is a fusion between two or more

enterprises where the identity of one or moreis lost and the result is a single enterprise.

Acquisition, also known as takeover is the

buying of one company by another.


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TATA GROUP is 150 year old, previously Tata

Engineering and Locomotive Company, Telco. Indias largest passenger automobile and

commercial vehicle.

Tata Motors was established in 1945

Listed on the New York Stock Exchange in

2004.


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Jaguar and Landrover(informally JLR) is a britishautomotive company.

Jaguar in 1975 - Nationalized in due to financial

difficulties 1990 - Taken over by Ford Founded in 1948 as a marquee of the Rover

Company. Known for superior off-road performance, Used

by military for projects and expeditions, Safe butless reliable, Makeover in recent times

In 1994 Rover Group is taken over by BMW &sold to FORD MOTORS for 2.75 bn$ in 2000


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Ford acquired Jaguar for $2.5 billion in 1989.

Ford acquired Land Rover for $2.75 billion in2000.

But the US auto major put the two marquees

on the market in 2007 after posting losses of

$12.6 billion in 2006 - the heaviest in its 103-

year history.


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Reports said losses at Jaguar stood at USD

715 million in 2006. The Land Rovers profit, on the other hand,

was driven by the record sale of 2.26 lakhvehicles, an 18% growth in 2007.

Bringing down production costs and turningaround the company successfully will be thechallenge-Its a test that Ford failed.

Ford is combining both the brands


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12/06/2007- Announcement from Ford that it plans to sell

Land Rover and Jaguar. August 2007 - Major bidders were identified:

Tata Motors,

M&M, Ceribrus capital Management,

TPG Capital,

Apollo Management

Indias Tata Motors and M&M arrived as top bidders ($ 2.05b

& $ 1.9b) 03/01/2008 Ford announces Tata as the preferred bidders

26/03/2008 - Ford agreed to sell their Jaguar Land Rover

operations to Tata Motors.(2.3b)

02/06/2008 The acquisition was complete


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Long term strategic commitment to automotivesector

Opportunity to participate in two fast growing

auto segement Increased business diversity across market and

product Jaguaroffer a range of performance/luxury

vehicles Benefits from component sourcing, design

services and low cost engineering. Land Rover provides a natural fit for TMLs suv

segment.


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WHAT IS TATA PAYING FOR ????

100% stake in Jaguar & land

Rover Business

Tata Motors has acquired the business & initially they will be operated independently

of the partner.

Three plants in UK Tata Motors will directly own these two well invested plants by Ford.

Two advanced design &

engineering center

4000-5000 engineers engaged in testing, prototype design & power train engineering,

development & integration.

Twenty six National sales

company

Both existing national sales companies of JLR and also those that are carved out of

current Ford operation would be owned by Tata Motors.

Intellectual property rights These covers all key technologies to be transferred to JLR & perpetual royalty free

license on technologies shared with Ford.

Capital Allowance Capital allowance with a minimum guaranteed amount of US $1.1 billion to be carried

forward for future tax savings.

Support from Ford Motor Credit Ford Motor Credit will continue to support the sales of JLR for the next 12 months

Pension Contributed by Ford Ford will contribute US$ 600 million of the Pension Fund to the workers in United


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Technological advances

Diversification of markets

Synergy with Other Group Firms

Completing the Product Portfolio


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Tata gains the following

1. Improvedmanufacturing acrossdifferent product lines

2. Increasedcompetitiveness in

design andmanufacturing

Technologygets used in

TataMotors

Transfer ofTechnology

The transfer of technologyeventually helps the

companys products compete

in the local and globalmarkets.


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Company Savesmoney in the

Short Run

This contributesto the failure indiversification

Tata Motors bearsundiversifiedeconomic risk

Company experiencesShort term Cash

Outflow and increaseddebt

Company is able touse Jaguar and LandRover to enter North

American Market

Tata Motors risk getsdiversified .

International marketKnowledge Acquired

Scenario if Land Rover and Jaguar isnot Acquired

Scenario if Land Rover and Jaguar isgets acquired

Failure of the Thrustfor Market

Diversification

Success of theCompanys Thrust for

MarketDiversification


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Tata Motors

Tata Steel

Tata Hotels

Jaguar and LandRover

Lower cost of Steel (primarycomponent for vehicleproduction)

Contribution toEconomies of Scale

More competitive

spare parts costing,expertise in durability,more efficientoperations

Global Network,Technology, Aesthetic

designs for diversifiedmarkets

Reinforced credentials byassociation with top hotels.

Mutual Brand ImageEffects throughassociation


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Tata Motors is Currently in passenger cars, light

trucks,medium and heavy trucks as well as buses.

For the passenger car segment, Tata Motorsserves the low income to middle income market

It does not have an existing luxury brand tocompete with foreign counterparts such as Lexus,BMW, Mercedes Benz etc.


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Tata wanted to make a global impact and it

thinks that buying these brands at a lower

rate now, will give better value later on.

This acquisition also eases the entry of Tata in

European market which it has been eyeing for

long. A previous JV with FIAT took place, this

will further help them penetrate EU market.


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Increase sales in emerging markets

Reduce dependence on mature markets Opportunity to spread its business across

different customer segment

Reduce the company dependence on theIndian market which accounted for 90% of its

sales


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Tata Motors stood to gain on several fronts from the deal. The acquisition would help the company acquire a global

footprint and enter the high-end premier segment of theglobal automobile market

Tata also got two advance design studios and technologyas part of the deal the company gets access to latesttechnology which would also allow Tata to improve theircore products in India, for eg, Indica and Safari suffered

from internal noise and vibration problems

This deal provided Tata an instant recognition andcredibility across globe which would otherwise would havetaken years Privileged & Confidential.


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Following Cost Rationalisation initiatives weretaken to improve cash flows:

Single shifts and down time at all three UK

assembly plants. Supplier payment terms extended from 45 to

60 days in line with industry standard.

Receivables reduced by 133 million from 38to 27 days. Inventory reduced by 217m between June

2008 and March 2009 from 70 to 50 days .


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Labor actions- Voluntary retirement to 600 employees.- Agency staff reduced by 800.- Offered leaves to 300 workers of Bromwhich and solihull

plant.- Additional 450 job cuts including 300 managers. Agreement with Unions to implement pay freeze and

longer working hours (equivalent to approximately 20%reduction in labor costs.)

Engineering and capital spending efficiencies. Fixed marketing and selling costs reduced in line with sales

volume. Reduction in all other non-personnel related overhead

costs.


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Cumulative losses for many years

Goodtime to get hold of two unique brandsfor Tata Motors

Unavailability of other options


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Global Footprint

Long term economies of scale Broaden the brand portfolio

Long term commitment to automobile sector

Recognition to own the cheapest car as wellas most luxurious cars

Cost competitive advantage


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Financing the deal

Investor disagreement

Unfavourable economic conditions especially

in the target market


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Debt burden

Fall in share price

Inexperience in handling luxury brands

Strong competition


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The biggest buyout in automobile space by an automobilecompany, Tata Motors was completed on june 3, 2008 as it boughtthe ownership of luxury brands, JAGUAR and LANDROVER for $2.3billion on a cash free debt free basis

THE LEVERAGE BUYOUT SCENE

Tata motors raised $3 billion , about Rs. 12000 crore throughbridge loans of fifteen months from a clutch of banks includingJP MORGAN, CITIGROUP, and STATE BANK OF INDIA

Company charted out plans to raise rs. 7200 crore via rights issue,

proceeds of which were to be used to part finance the JLR deal ofrs.9228.75 crore

The rights issue raised the equity capital of TATA MOTORS by 30-35% by march 2009


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Successful

Record Revenues & earnings

Net Income growth

Volume growth


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Grow the business through new products &

market expansion

Started assembling Land Rover vehicles atPune Plant

The company is also seeking to establish a

manufacturing base in China.

JLR to spend 8.2 mn over the next 5 years to

compete more effectively with Audi, BMW,

Mercedes Benz.


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Transform the business structure to deliver

sustainable returns Investment in product development and

technology to maintain high quality

The company aims to increase its marketingand dealer network in emerging markets


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THANK YOU

Documents

m&a of Tatamotors and Jaguars