Tata Acquired Luxury Auto Brands Jaguar and Land Rover ³from Ford Motors

A $ 2.3 Billion Takeover JUNE 2008

Presented By ± JONATHAN OLSEN FERNANDES
Ford Motors Company The Ford Motor Company is an American multinational corporat
ion based in Dearborn, Michigan,, a suburb of Detroit. Michigan Detroit.
Founded: 1903 by Henry Ford Competitors: General Motors, Toyota; Brand names: Li
ncoln, Mercury, Volvo, Mazda, Mercury. 1913 - Assembly Line: ´low priced, mass-pro
duced automobile with massstandard interchangeable parts.µ Hiring of African Ameri
cans, Virtual manufacturing, focus on safety, Advantage through fuel efficiency
TATA MOTORS TATA GROUP is 150 year old, Previously Tata Engineering and Locomoti
ve Company, Telco. Tata Motor·s break-even point for capacity utilization is one o
f the best in the breakindustry worldwide Listed on the New York Stock Exchange
in 2004. NANO had mark the advent of India as a global centre for small-car smal
lproduction. International praise came from Standard & Poor·s, which in December 2
006 expressed the view that the ´policy to support its companies and the improved
financial profile of its entities also enhances the overall financial flexibilit
y of Tata Motors.µ
Jaguar: The ups and downs: 1922 - Founded in Blackpool as Swallow Sidecar compan
y 1935 - Jaguar name first appeared . 1975 - Nationalized in due to financial di
fficulties 1984 - Floated off as a separate co in the stock market 1990 - Taken
over by Ford
The case of Land Rover: Known for superior off-road performance, Used by militar
y for projects and offexpeditions, Safe but less reliable, Makeover in recent ti
mes. 1948: Land Rover is designed by the Rover Car co 1976: One millionth Land R
over leaves the production line 1994: Rover Group is taken over by BMW 2000: Sol
d to Ford for £1.8 billion Key issues: Ford acquired Jaguar for $2.5 billion in 19
89. Ford acquired Land Rover for $2.75 billion in 2000. But the US auto major pu
t the two marquees on the market in 2007 after posting losses of $12.6 billion i
n 2006 - the heaviest in its 103-year history. 103-
The Deal Process: 12/06/200712/06/2007- Announcement from Ford that it plans to
sell Land Rover and Jaguar. August 2007 - Major bidders are identified Likely bu
yers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo Managem
ent India s Tata Motors and M&M arrive as top bidders ($ 2.05b & $ 1.9b) 03/01/2
008 ² Ford announces Tatas as the preferred bidders 26/03/2008 - Ford agreed to se
ll their Jaguar Land Rover operations to Tata Motors. 02/06/2008 ² The acquisition
is complete
Why is Ford selling? Reports said losses at Jaguar stood at USD 715 million in 2
006. Jaguar has not been able to provide any profit for ford because of the high
manufacturing costs provided in the United Kingdom. Ford motors felt that the a
cquisition of these 2 brands was not the right way to penetrate in the upscale s
egment Bringing down production costs and turning around the company successfull
y will be the challenge,µ analysts said. It·s a test that Ford failed. Ford is combi
ning both the brands since the products and manufacturing of vehicles for Land R
over and Jaguar is so intertwined.
Why acquire JLR? Long term strategic commitment to automotive sector. Opportunit
y 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 se
gment. Jaguar offers a range of ´performance/luxuryµ vehicles to broaden the brand p
ortfolio. Benefits from component sourcing, design services and low cost enginee
ring.
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 E
urope, the United States, Australia and Africa - some even several times larger
- in a bid to consolidate operations and emerge as the new age multinationals. T
ata 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 2006lea
der 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 st
ruck local alliances for a bigger presence. Tata Motors, which has a joint ventu
re with Fiat for cars, engines and transmissions in India, is also facing heat f
rom 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 loan raised through a syndicate of ban
ks. The bridge money will be replaced by a combination of long-term debt and lon
gequity at an appropriate time. The company will raise funds to finance its equi
ty contribution by selling a portion of its stake in some of its subsidiaries. C
itigroup and JPMorgan are the lead advisors to the deal, which is the largest cr
oss-border auto acquisition by an Indian company. cross-
Tata has acquired the two companies for about half the price that Ford paid thei
r 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 M
otors will have to commit significant managerial and financial resources to engi
neer 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 requiremen
ts.
The all-cash deal, which was agreed in March, includes all necessary allintellec
tual property rights, manufacturing plants, two advanced design centers in the U
K and a worldwide network of sales companies. Included in the deal were the righ
ts to three other British brands, Jaguar's own Daimler, as well as two dormant b
rands Lanchester and Rover. Daimler, Rover. parties. On 2 June 2008 the sale to
Tata was completed by both parties.
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