Tata Acquisition JLR

8/8/2019 Tata Acquisition JLR

1/15

Tata AcquiredTata Acquired

Luxury Auto BrandsLuxury Auto BrandsJaguar and Land RoverJaguar and Land Rover

from Ford Motorsfrom Ford MotorsA $ 2.3 Billion Takeover

JUNE 2008

Presented By JONATHAN OLSEN FERNANDES


2/15

Ford Motors CompanyFord Motors Company

TheFord Motor Company is an AmericanTheFord Motor Companyis an Americanmultinationalcorporationmultinationalcorporation basedinbasedinDearborn, MichiganDearborn, Michigan, a suburbof, a suburbofDetroitDetroit..

Founded: 1903 by HenryFordFounded: 1903 by HenryFordCompetitors: General Motors, Toyota; Brandnames: Lincoln,Competitors: General Motors, Toyota; Brandnames: Lincoln,

Mercury, Volvo, Mazda, Mercury.Mercury, Volvo,Mazda,Mercury.

19131913 -- Assembly Line: lowpriced,massAssembly Line: lowpriced,mass--produced automobilewithproduced automobilewithstandardinterchangeableparts.standardinterchangeableparts.

Hiringof African Americans, Virtualmanufacturing,focusonHiringof African Americans, Virtualmanufacturing,focusonsafety, Advantagethrough fuelefficiencysafety, Advantagethrough fuelefficiency


3/15

TATAMOTORSTATAMOTORS

TATA GROUPis 150 yearold,PreviouslyTata Engineering and LocomotiveTATA GROUPis 150 yearold,PreviouslyTata Engineering and LocomotiveCompany,Telco.Company,Telco.

TataMotorsbreakTataMotorsbreak--evenpointforcapacityutilizationisoneofthebestintheevenpointforcapacityutilizationisoneofthebestintheindustryworldwideindustryworldwide

Listedonthe New York Stock Exchangein 2004.Listedonthe New York Stock Exchangein 2004.

NANO hadmark the adventof India as aglobalcentrefor small NANO hadmark the adventof India as aglobalcentrefor small--carcarproduction.production.

InternationalpraisecamefromStandard & Poors,which in December 2006 InternationalpraisecamefromStandard & Poors,which in December 2006expressedtheviewthatthe policyto supportitscompanies andtheimprovedexpressedtheviewthatthe policyto supportitscompanies andtheimprovedfinancialprofileofitsentities alsoenhancestheoverallfinancialflexibilityoffinancialprofileofitsentities alsoenhancestheoverallfinancialflexibilityofTataMotors.TataMotors.


4/15

Jaguar:

Theups anddowns:

Jaguar:

Theups anddowns:

19221922 -- FoundedinFoundedin BlackpoolBlackpool asSwallowSidecarcompanyasSwallowSidecarcompany19351935 -- Jaguarnamefirst appeared.Jaguarnamefirst appeared.19751975 -- NationalizedinduetofinancialdifficultiesNationalizedinduetofinancialdifficulties

19841984 -- Floatedoff as a separatecointhe stock marketFloatedoff as a separatecointhe stock market19901990 -- TakenoverbyFordTakenoverbyFord


5/15

Thecaseof LandRover:Thecaseof LandRover:Knownfor superioroffKnownfor superioroff--roadperformance,Usedbymilitaryforprojects androadperformance,Usedbymilitaryforprojects andexpeditions,Safebutlessreliable,Makeoverinrecenttimes.expeditions,Safebutlessreliable,Makeoverinrecenttimes.

1948: LandRoverisdesignedbytheRover Carco1948: LandRoverisdesignedbytheRover Carco1976:Onemillionth LandRoverleavestheproductionline1976:Onemillionth LandRoverleavestheproductionline

1994:Rover GroupistakenoverbyBMW1994:Rover GroupistakenoverbyBMW2000:SoldtoFordfor 1.8 billion2000:SoldtoFordfor 1.8 billion

Keyissues:Keyissues: Ford acquiredJaguarfor $2.5 billionin 1989. Ford acquiredJaguarfor $2.5 billionin 1989.

Ford acquired LandRoverfor $2.75 billionin 2000. Ford acquired LandRoverfor $2.75 billionin 2000. ButtheUS automajorputthetwomarqueesonthemarketin 2007 after ButtheUS automajorputthetwomarqueesonthemarketin 2007 afterpostinglossesof $12.6 billionin 2006postinglossesof $12.6 billionin 2006 -- the heaviestinits 103the heaviestinits 103--year history.year history.


6/15

The DealProcess:The DealProcess:

12/06/200712/06/2007-- AnnouncementfromFordthatitplansto sell LandRover andAnnouncementfromFordthatitplansto sell LandRover andJaguar.August 2007Jaguar.August 2007 -- Majorbidders areidentifiedMajorbidders areidentifiedLikelybuyers:TataMotors,M&M,Likelybuyers:TataMotors,M&M, CeribrusCeribruscapitalManagement,TPG Capital,capitalManagement,TPG Capital,ApolloManagementApolloManagement

IndiaIndiassTataMotors andM&M arrive astopbidders ($ 2.05b & $ 1.9b)TataMotors andM&M arrive astopbidders ($ 2.05b & $ 1.9b)

03/01/2008 03/01/2008 Ford announcesFord announcesTatasTatasasthepreferredbiddersasthepreferredbidders

26/03/2008 26/03/2008 -- Ford agreedto selltheirJ

aguar LandRoveroperationstoFord agreedto selltheirJ

aguar LandRoveroperationstoTataMotors.TataMotors.

02/06/2008 02/06/2008 The acquisitioniscompleteThe acquisitioniscomplete


7/15

WhyisFord selling?WhyisFord selling?

Reports saidlosses atJaguar stood atUSD 715 millionin 2006.Jaguar Reports saidlosses atJaguar stood atUSD 715 millionin 2006.Jaguarhasnotbeen abletoprovide anyprofitforfordbecauseofthe highhasnotbeen abletoprovide anyprofitforfordbecauseofthe highmanufacturingcostsprovidedintheUnited Kingdom.manufacturingcostsprovidedintheUnited Kingdom.

Fordmotorsfeltthatthe acquisitionofthese 2 brandswasnottheright Fordmotorsfeltthatthe acquisitionofthese 2 brandswasnottherightwaytopenetrateinthewaytopenetrateintheupscale segmentupscale segment

Bringingdownproductioncosts andturning aroundthecompany Bringingdownproductioncosts andturning aroundthecompanysuccessfullywillbethechallenge, analysts said. Its atestthatFordfailed.successfullywillbethechallenge, analysts said. Its atestthatFordfailed.

Fordiscombiningboth thebrands sincetheproducts andmanufacturing Fordiscombiningboth thebrands sincetheproducts andmanufacturingofvehiclesfor LandRover andJaguaris sointertwined.ofvehiclesfor LandRover andJaguaris sointertwined.


8/15

Why acquireJLR?Why acquireJLR?

Longterm strategiccommitmentto automotive sector. Longterm strategiccommitmentto automotive sector.

Opportunitytoparticipateintwofastgrowing auto segments. Opportunitytoparticipateintwofastgrowing auto segments.

Increasedbusinessdiversity acrossmarkets andproducts. Increasedbusinessdiversity acrossmarkets andproducts.

Landroverprovides anaturalfitforTML Landroverprovides anaturalfitforTMLss suvsuv segment.segment.

Jaguaroffers arangeof performance/luxuryvehiclestobroadenthe Jaguaroffers arangeof performance/luxuryvehiclestobroadenthebrandportfolio.brandportfolio.

Benefitsfromcomponent sourcing,design services andlowcost Benefitsfromcomponent sourcing,design services andlowcostengineering.engineering.


9/15

Tata andthedreamTata andthedreamNEED FOR GROWTHNEED FOR GROWTH

Inthepastfew years,theTatagroup hasledthegrowing appetite among Inthepastfew years,theTatagroup hasledthegrowing appetite amongIndiancompaniesto acquirebusinessesoverseasin Europe,theUnitedIndiancompaniesto acquirebusinessesoverseasin Europe,theUnitedStates,Australia andAfricaStates,Australia andAfrica -- someeven severaltimeslargersomeeven severaltimeslarger -- in abidtoin abidtoconsolidateoperations andemerge asthenew agemultinationals.consolidateoperations andemerge asthenew agemultinationals.

TataMotorsis India'slargest automobilecompany,with revenuesof $7.2 TataMotorsis India'slargest automobilecompany,with revenuesof $7.2billionin 2006billionin 2006--07.With over 4 millionTatavehiclesplyingin India,itisthe07.With over 4 millionTatavehiclesplyingin India,itistheleaderincommercialvehicles andthe secondlargestinpassengervehicles.leaderincommercialvehicles andthe secondlargestinpassengervehicles.


10/15

COMPETITIVE ADVANTAGECOMPETITIVE ADVANTAGE

TataMotorsisvulnerabletogreatercompetition at home.Foreignvehicle TataMotorsisvulnerabletogreatercompetition at home.Foreignvehiclemakersincluding Daimler, NissanMotor, Volvo andMAN AG have struck localmakersincluding Daimler, NissanMotor, Volvo andMAN AG have struck localalliancesfor abiggerpresence.alliancesfor abiggerpresence.

TataMotors,which has ajointventurewith Fiatforcars,engines and TataMotors,which has ajointventurewith Fiatforcars,engines andtransmissionsin India,is alsofacing heatfromtopcarmakertransmissionsin India,is alsofacing heatfromtopcarmakerMarutiMaruti SuzukiSuzukiIndiaLtd, HyundaiMotor,Renault and Volkswagen.IndiaLtd, HyundaiMotor,Renault and Volkswagen.


11/15

The real challenge lies in running JLR.The real challenge lies in running JLR.

The acquisition cost of $2.3 billion is financed by aThe acquisition cost of $2.3 billion is financed by a bridge loanbridge loan, which will be, which will beraised through a syndicate of banks.raised through a syndicate of banks.

The bridge money will be replaced by a combination of longThe bridge money will be replaced by a combination of long--term debt andterm debt andequity at an appropriate time.equity at an appropriate time.

The company will raise funds to finance its equity contribution by selling aThe company will raise funds to finance its equity contribution by selling aportion of its stake in some of its subsidiaries.portion of its stake in some of its subsidiaries.

Citigroup and JPMorgan are the lead advisors to the deal, which is theCitigroup and JPMorgan are the lead advisors to the deal, which is thelargest crosslargest cross--border auto acquisition by an Indian company.border auto acquisition by an Indian company.


12/15

Tata has acquired the two companies for about half the price thatTata has acquired the two companies for about half the price thatFord paid their original owners when the latter acquired them inFord paid their original owners when the latter acquired them in1989.1989.

Tata Motors itself has just become more global afterCORUS &Tata Motors itself has just become more global afterCORUS &FORD Deals.FORD Deals.


13/15

The key challenge for the new owner of Jaguar and LandThe key challenge for the new owner of Jaguar and LandRover will be to grow and maintain sales of the twoRover will be to grow and maintain sales of the twobrands in a global downturn and credit crunch.brands in a global downturn and credit crunch.

Tata Motors will have to commit significant managerialTata Motors will have to commit significant managerialand financial resources to engineer a turnaround. It willand financial resources to engineer a turnaround. It will

have to significantly step up its R&D budget as well ashave to significantly step up its R&D budget as well asincrease operating expenditure and capital expenditureincrease operating expenditure and capital expenditureto meet JLRs requirements.to meet JLRs requirements.


14/15

The allThe all--cash deal,which was agreedinMarch,includes allnecessarycash deal,which was agreedinMarch,includes allnecessaryintellectualpropertyrights,manufacturingplants,two advanceddesignintellectualpropertyrights,manufacturingplants,two advanceddesigncentersintheUK and aworldwidenetwork of salescompanies.centersintheUK and aworldwidenetwork of salescompanies.

IncludedinthedealweretherightstothreeotherBritish brands,Jaguar'sIncludedinthedealweretherightstothreeotherBritish brands,Jaguar'sownownDaimlerDaimler, aswell astwodormantbrands, aswell astwodormantbrandsLanchesterLanchester andandRoverRover..

OnOn2 June2 June 20082008 the saletoTatawascompletedbyboth partiesthe saletoTatawascompletedbyboth parties..


15/15

THANK YOU !THANK YOU !

Documents

Tata Acquisition JLR