Tata Acquired

Luxury Auto Brands

Jaguar and Land Rover
—from Ford Motors
A $ 2.3 Billion Takeover
JUNE 2008

Presented By –
SULABH SINGH `
MBA Int’l Buss. A7002009007
Ford Motors Company
Location: Dearborn, Michigan
Founded: 1903 by Henry Ford
Competitors: General Motors, Toyota; Brand names: Lincoln, Mercury, Volvo, Mazda, Jaguar and Land Rover

1913 - Assembly Line: “low priced, mass-produced automobile with standard interchangeable parts.”

Hiring of African Americans, Virtual manufacturing, focus on safety, Advantage through fuel efficiency
Jaguar: The ups and downs:
1922 - Founded in Blackpool as Swallow Sidecar compy
1960 - Jaguar name first appeared in 1935
1975 - Nationalized in due to financial difficulties
1984 - Floated off as a separate co in the stock market
1990 - Taken over by Ford

A statement of ultra luxury, Holds Royal warrants, Rarely advertised, Ford‟s formula one entry since 1990s
The case of Land Rover:
Known for superior off-road performance, Used by military for projects and expeditions, Safe but less reliable, Makeover in recent times.
1948: Land Rover is designed by the Rover Car co
1976: One millionth Land Rover leaves the production line
1994: Rover Group is taken over by BMW
2000: Sold to Ford for £1.8 billion

Key issues:
• Ford acquired Jaguar for $2.5 billion in 1989.
• Ford acquired Land Rover for $2.75 billion in 2000.
• 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.
The Deal Process:
12/06/2007- Announcement from Ford that it plans to sell Land Rover and Jaguar. August 2007 - Major bidders are identified
Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo Management

• India‟s Tata Motors and M&M arrive as top bidders ($ 2.05b & $ 1.9b)

• 03/01/2008 – Ford announces Tatas as the preferred bidders

• 26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors.

• 02/06/2008 – The acquisition is complete

TATA MOTORS
TATA GROUP is 150 year old, Previously Tata Engineering and Locomotive Company, Telco.

Tata Motors‟s break-even point for capacity utilization is one of the best in the industry worldwide

Listed on the New York Stock Exchange in 2004.

Making Waves Internationally

• NANO will mark the advent of India as a global centre for small-car production and represent a victory for those who advocate making cheap goods for potential customers at the 'bottom of the pyramid' in emerging markets.

• International praise came from Standard & Poor’s, which in December 2006 expressed the view that the “policy to support its companies and the improved financial profile of its entities also enhances the overall financial flexibility of Tata
Motors.”
Why is Ford selling?
• Reports said losses at Jaguar stood at USD 715 million in 2006. Jaguar has not been able to provide any profit for ford because of the high manufacturing costs
provided in the United Kingdom.
• The strong boy Land Rover's profit, on the other hand, was driven by the record sale of 2.26 lakh vehicles, an 18% YoY growth in 2007.
• Bringing down production costs and turning around the company successfully will be the challenge,” analysts said. It’s a test that Ford failed.
• Ford is combining both the brands since the products and manufacturing of vehicles for Land Rover and Jaguar is so intertwined.
What Ratan Tata says?
• We aim to support their growth, while holding true to our principle of allowing the management and employees to bring their experience and expertise
to bear on the growth of the business.„

• 'We have enormous respect for the two brands and will endeavor to preserve and build on their

• Heritage and competitiveness, keeping their identities intact,' he said in a statement.

Why acquire JLR?
• Long term strategic commitment to automotive sector.
• Opportunity to participate in two fast growing auto segments.
• Increased business diversity across markets and products.
• Land rover provides a natural fit for TML‟s suv segment.
• Jaguar offers a range of “performance/luxury” vehicles to broaden the brand portfolio.
• Benefits from component sourcing, design services and low cost engineering.
Tata and the dream
NEED FOR GROWTH

• In the past few years, the Tata group has led the
growing appetite among Indian companies to acquire
businesses overseas in Europe, the United States,
Australia and Africa - some even several times larger -
in a bid to consolidate operations and emerge as the
new age multinationals.

• Tata Motors is India's largest automobile company,

with revenues of $7.2 billion in 2006-07. With over 4
million Tata vehicles plying in India, it is the leader in
commercial vehicles and the second largest in
passenger vehicles.
COMPETITIVE ADVANTAGE
• Tata Motors is vulnerable to greater competition at
home. Foreign vehicle makers including Daimler,
Nissan Motor, Volvo and MAN AG have struck local
alliances for a bigger presence.

• Tata Motors, which has a joint venture with Fiat for

cars, engines and transmissions in India, is also facing
heat from top car maker Maruti Suzuki India Ltd,
Hyundai Motor, Renault and Volkswagen.
The real challenge lies in running JLR.
The acquisition cost of $2.3 billion is financed
by a bridge loan, which will be raised through
a syndicate of banks.
The bridge money will be replaced by a
combination of long-term debt and equity at
an appropriate time.
The company will raise funds to finance its
equity contribution by selling a portion of its
stake in some of its subsidiaries.
Citigroup and JPMorgan are the lead advisors
to the deal, which is the largest cross-border
auto acquisition by an Indian company.
Besides the two US banks, the loan was under
eight banks — SBI, Bank of Tokyo-Mitsubishi,
UFJ, BNP, Paribas, ING, Mizuho and Standard
Chartered.
The loan has been structured in the form of
step-up financing: for the first six months, the
interest charge would be Libor (London Inter-
Bank Offered Rate) plus 70 basis points and
for the next six months, it would be 140 basis
points over the benchmark rate. The six-
month Libor is currently at 2.63%.
The bridge loan is being raised by a special
purpose vehicle — Tata Motors UK, will own
these two brands, which is 100% owned by
Tata Motors.
Tata has acquired the two companies for about half the price that Ford paid their
original owners when the latter acquired them in 1989.

Tata Motors itself has just become more global after CORUS & FORD Deals.
The key challenge for the new owner of
Jaguar and Land Rover will be to grow
and maintain sales of the two brands in
a global downturn and credit crunch.

Tata Motors will have to commit

significant managerial and financial
resources to engineer a turnaround. It
will have to significantly step up its
R&D budget as well as increase
operating expenditure and capital
expenditure to meet JLR’s
requirements.
The all-cash deal, which was agreed in
March, includes all necessary
intellectual property rights,
manufacturing plants, two advanced
design centers in the UK and a
worldwide network of sales companies.

Included in the deal were the rights to

three other British brands, Jaguar's
own Daimler, as well as two dormant
brands Lanchester and Rover.

On 2 June 2008 the sale to Tata was

completed by both parties.
THANK YOU !