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DEAL
The TATAs
Tata is an increasingly powerful multinational conglomerate with a market value of more than $70bn (35bn) and almost 290,000 people in its workforce in 80 countries. During the financial year March 2008, its revenues of about 18bn were equivalent to some 3.2% of India's gross domestic product.
The Mumbai-based group's subsidiaries are major corporations in their own right, active in industries ranging from IT services to power generation, to tea production, to steel. In the UK it already owns Tetley Tea and steelmaker Corus.
German manufacturer BMW is meanwhile enjoying successful production of the Mini in Cowley, central England. Last year, however, French car group Peugeot shut its plant in Coventry -- the same region that suffered after MG Rover went bankrupt. 2005.
IMPORTANT FACTS
Tatas - the top choice for buying the US auto giant Ford's iconic British brands Jaguar and Land Rover
The firm demolished the competition from rival Indian firm Mahindra and Mahindra
"When a private equity firm buys a company, the cost of buying it often goes onto the companies books. If anything then goes wrong how do you refinance the business?
The rights issue raised the equity capital of Tata Motors by 30-35 per cent by March 2009. The company also planned to raise $500-600 million through an issue of securities in the foreign markets.
Tatas fund J-LR Deal through Cash Reserves & New Debt
Tata Motors said : The $2.30 billion deal to acquire premium auto brands Jaguar and Land Rover would be funded through a mix of existing cash reserves and new debts. Tata Motors had announced that its Board has approved raising of Rs 4,000 crore (about one billion dollar) from either overseas or domestic markets through issuance of securities. The company had said the funds to be raised would be utilised to part finance overall funding requirement to meet some of its strategic plans. Stating that its expansion plans through organic route over the next 3-4 years might incur expenditure, the company said the acquisition opportunities have to be financed upfront.
The Tata Motors board approved the fund raising proposal. The funds were raised to part-finance overall funding requirements to meet some of the strategic plans,
Plans
Plans for expanding its position in the domestic and global markets in both the commercial vehicle and passenger vehicle business. This was achieved by upgrading and enhancing the companys product portfolio, expanding manufacturing facilities in India and strategic acquisitions and alliances in India and abroad.
While the organic growth plan required money over the next 3 to 4 years, the acquisition opportunities were to be financed up front. A source close to the development said Tata Motors would borrow from financial institutions to finance the Land Rover-Jaguar deal. The proceeds from the proposed share sale will be utilised to repay the loan, he added.
3 Plants in UK
4-5000 engineers engaged in testing ,prototype design & powertrain Engineering , development & integration
Both existing national sales companies of jaguar/land rover & also those that are carved out of current Ford operation
Intellectual property This covers all key technologies to be transferred to JLR & rights perpetual royalty free license on technologies shared with Ford
Capital Allowance
Support from Ford Motor Credit Pension
A minimum guaranteed amount of $1.1 bn which will help managing in Tax going forward
Ford Motor Credit will continue to support the sales of JLR for around next 12 months Ford will contribute $ 600 mn of the Pension Fund
Considering that Jaguar and Land Rover are two of the most well-known automotive names in the world, and that Ford had acquired them for a collective cost of about $5 billion almost a decade earlier, Tata Motors seems to have got them at a steal at $2 billion. Over the years, Ford spent close to a total of $10 billion on the brand but failed to return a profit. After incurring heavy losses for two consecutive years in 2006 and 2007, Ford took this move. Tata Motors has assured the employee union that both these factories will continue to operate without any retrenchments after the takeover. The process which started in 00 and reached new heights in 07 was said to have reached a Zenith with this. The Nanos plans were said to have been targeted towards the down markets but with this deal going through this has been contradicted as Tata was equally bullish in the upmarkets.
($ m)
(56)
(107)
537
We have assumed TAMO will put $700m as operating cash in JLR on consolidation in JLR. Hence the NCA of TAMO & JLR do not add up The cash equivalents includes shares of Tata Steel worth $400m held at cost of $50m
638
638
Total Assets
6,373
5,142
12,215
238
(256)
(18)
1,187
637
(225)
1,599
TAMO has a robust working capital management in its auto biz. Inventory and receivable days at around 30 & 9 respectively and creditors at around 40 days
The vehicle loan receivables skew the reported working capital picture as they are shown as part of working capital under Indian GAAP
(776)
(776)
(635)
(1,447) (38) 16
We estimate operating cashflow from auto biz largely covers TAMOs auto capex . Currently it would be free cashflow neutral to modest +ve.
(635)
(1,469)
Proforma Cashflow ($ m)
Chg in minorities
Chg in debt
949
3000
3949
Dividend
(154)
(154)
766
3000
3766
343
2,775
3,120
337
(225)
115
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