TATA - JLR DEAL

PREPARED BY:
Group-1
Abhishek Gupta (16)
Abhijeet Mandal (28)
Aditya Sheth (52)
Ruchi Gupta (119)
Heth Mehta (130)
Parth Palan (135)
 Global Automobile Industry Global Automobile Industry
Volumes Value ($ Billion)
VOLUME (IN MILLIONS)

68 8.0% 1600 8.0%

VALUE ($ BILLION)
5.75%

GROWTH (%)

GROWTH (%)
66 6.64% 1550 6.0%
6.0%
64 3.74%
1500 4.0%
62 4.0%
60 1450 2.0%
2.34%
2.0%
58 0.30% 1400 -0.49%0.0%
56 0.0% 1350 -2.0%
2005 2006 2007 2008 2005 2006 2007 2008

Volume Growth(%) Value Growth(%)

• Founded in 1945
• Initially in locomotive business
• India’s Market leader in
commercial vehicle
• Operates through subsidiaries
and associate companies in UK,
South Korea, Thailand, Spain,
South Africa and Indonesia.
• 1st fully indigenous Indian
Passenger car Tata Indica in
1998.
Missile Carrier Troops Carrier Refueler
Tata Motors' plants are located in
- Jamshedpur (eastern India)
- Pune
- Sanand (west) (Ahmedabad)
- Dharwad (south west) (Karnataka)
- Lucknow
- Pantnagar (north) (Uttarakhand)
- Tata Motors and Fiat have set up a common
manufacturing facility at Ranjangaon, near Pune.
• Tata Motors Finance ltd. – Vehicle Financing
• Tata Motors Insurance broking & Advisory services
ltd. – Vehicle Insurance
• After Market operations
• Auto Finance
• IT services
• Automobile Retail
• Sales and Distribution
• Logistics
• Supply Chain Management
 Introducing Jaguar Land

Rover

• One global premium automotive business, two great British car

brands

• Global sales of around 300,000 units, across 169 countries

• Global revenue $15 billion – up over 50% in five years

• Nine car lines, designed, engineered and manufactured in the UK

• 16,000 talented and passionate employees

Jaguar: inspired by its sporting
legends but looking to the
future

1922 1948 1961 1968 1989 2003 2006

Swallow Side Car Mark V and XK120 Launch of E-Type XJ Model debut Jaguar acquired by Launch of Launch of
Company founded Ford all-aluminium XJ all-aluminium XK
by motorcycle
enthusiasts

1930 1940 1950 1960 1970 1980 1990 2000

1935 1951 1999 2001 2008 2008

Jaguar name first Won first Le Mans race Launch of S-Type Launch of X-Type Launch of XF Tata Motors
appeared on 1953 (replacing S-Type) acquires
2.5 Litre saloon and Took 1st, 2nd and 4th at Le Mans Jaguar Land Rover
company takes on the 1956
name First manufacturer to win both Le
Mans and the Monte Carlo rally
 Land Rover: after 60 years,
delivering the finest ever all-
terrain vehicles

1948 1970 2000 2004 2007

First Land Rover, the Series I,
was produced in Solihull
Range Rover introduced as
the first genuinely
multi-purpose vehicle
Land Rover acquired by Ford
New Discovery model launched – most Launch of
awarded SUV with over 100 industry & Freelander/ LR2 and
New Defender
media awards around the world
powertrain

1950 1960 1970 1980 1990 2000

1989 1997 2001 2005 2008

Launch of Discovery Freelander launched New Range Rover Range Rover Sport Tata Motors acquires
launched launched Jaguar Land Rover
Manufacturing
Locations
 JLR has excellent UK

facilities

Halewood Whitley
• X-Type & Freelander • Design and Engineering Centre
• Stamping, Body & Assembly • 1,900 Employees
• 2,000 Employees
• Very successful turnaround
• Highest Ford FPS and Quality Awards
• JD Power European Gold Plant Award (2005) Gaydon

• Global JLR headquarters

• Design and Engineering Centre
Castle Bromwich • M&S and Staff functions
• XK, XJ, XF • 2,900 Employees
• Stamping, Body & Assembly
• 2,600 Employees Memo:
• Many quality and FPS awards • Overseas M&S: 1,000 employees in 25
• Also Browns Lane (Veneer Centre) in national sales companies
Coventry

Solihull
• Range Rover, Range Rover Sport, Discovery,
Defender
Manned Capacity (000s)
• Stamping, Body & Assembly including Europe's • Halewood 89
largest Press (5-stage transfer press) • Castle Bromwich 65
• 5,600 Employees • Solihull 153
Total 307

 All products designed, engineered and assembled in the UK

 A significant part of UK’s automotive R&D and a major employer and
exporter
• Outbound Logistics: Parts and Vehicles are distributed
via a global logistics network with revenues being
recognized when vehicles are wholesaled to retailers
• Marketing and Sales: To ensure a consistent and
premium brand experience across every customer
touchpoint
• Retailer Network: JLR has a network of 2720 retailers of
which 1026 are jointly branded as Jaguar and Land
Rover
• Financial Services: JLR has arrangements in place for the
provision of retail and consumer financial services
products with third party providers
 DUE DILIGENCE
• Business Due Diligence

• Accounting Due Diligence

• Legal Due Diligence

• IT Due Diligence
Synergies In TATA JLR deal
•Provides •Flagship Company
engineering of Tata Motors’
 Tata Group services and global ancillary business
sourcing •Expert in
acquiring manufacturing,
engineering and
JLR created Tata Supply Chain
Tata
an Auto management
Techno
Comp
Integrated logies
Cost onents
value chain JL
Synergie system, Tata R
s bringing the Consul Tata
different tancy Steel
Service Chorus
partners of s
value chain •Provide Services •Leader in
like engineering automotive grade
closer to design and steel in European
each other, manufacturing
solutions
Markets
•Key RM supplier
creating cost •Automotive to Ford and JLR
division account
synergies
 In the long run, for
Tata15% revenues
Motors footprint in South East Asia will
and
help JLR in diversifying their geographic dependence and
Revenue improved
expand to Asia
margins
Synergie  Distinguish brand identity of Land Rover and Jaguar,
emerging Indian car market and opportunity to sell brands in
s India and opportunity of global presence lured Tata Motors
Deal Attractiveness
Comprehensive Cost
Product Competitive
Portfolio Advantage

Expanding
Global Access to
Footprint Latest
Technology
Recognition Need for Benefits
and
Growth Others to JLR
Credibility
 Deal Structure for Tata JLR

Tata Motors acquired the Jaguar Land Rover business from the Ford Motor Company
for a net consideration of $2.3 billion, as announced on March 26, 2008 in an all-cash
transaction.
Deal Highlights:

 Jaguar Land Rover was acquired at a cost

of $2.3 billion on a cash-free, debt-free
basis
 The purchase consideration includes the
ownership by Jaguar and Land Rover, or
perpetual royalty-free licences of all
necessary intellectual property rights,
manufacturing plants, two advanced
design centres in the UK, and a
worldwide network of national sales
companies
 Long-term agreements were entered for
supply of engines, stampings, and other
components to Jaguar Land Rover. Other
areas of transition support from Ford
include IT, accounting, and access to test
 Legalities & Objections

• The senior management of JLR preferred Tata Motors for

the being the preferred buyer, but fears existed of
restructuring within the management.
• Government Regulations and taxes
• Steps were taken to empower and also confidence
building measures were adopted, in order to building a
strong base for corporate culture between Tata and JLR
operations and also to increase the performance of JLR
• The managing team framed shared norms in order to
minimize the trust deficit between the subordinates, as
possible misinterpretation could have resulted in
diminishing the overall objectives of the change process
 Post Merger Analysis
• Stock dropped to 126.45 rupees, before the deal, the stock
had traded at 700 rupees per share.
• Tata Motors had a market capitalisation of Rs 24,000 crore.
Five months after the deal, it had plunged to Rs 6,500 crore
• Debt equity ratio increased by 42.27% as Tata took loans to
acquire JLR
• Slump in new car sales in late 2008 as a result of the credit
crunch; Tata had to refinance in order to keep JLR solvent. UK
government considered a financial aid package, indicating
the strategic importance of JLR to the UK economy
 Post Merger Analysis
• Several cost rationalization initiatives were taken to improve cash
flows:
1. Single Shifts and down time at all three UK assembly plants
2. Supplier payment terms exteneded from 45 to 60 days in line with
industry standard
3. Receivables reduced by 133 million pounds from 38 to 27 days
4. Inventory reduced by 217 million pounds between June 2008 and
March 2009 from 70 to 50 days
5. Labour Actions : Voluntary retirement to 600 employees, Agency
staff reduced by 800, offered leaves to 300 workers of
Brohmwhich and Solihull plant, Additional 450 job cuts including
300 managers
6. Agreement with Unions to implement pay freeze and longer
working hours
 Post Merger Analysis
• Tata pumped $1 billion to fund operations and new
product launches
• TATA gave JLR access to developing and potential
market of BRIC nations. Sales of JLR is increased by
200% in China.
• The share had risen to a respectable Rs 1,302.15
taking market capitalization to Rs 79,573.08 crore