WELCOME TO PRESENTATION OF MERGER AND AQUICISION

Presented By:Sandeep Mane Rajesh Mankar Omkar Warde Vishal Kokane Ankit Sanket Dond

WHAT IS MERGER & ACQUISITION ?

MERGER

TATA MOTORS, JAGUAR & LAND ROVER OVERVIEW

TATA MOTORS OVERVIEW

TATA GROUP is 150 year old, Previously Tata Engineering and Locomotive Company, Telco. India's largest passenger automobile and commercial vehicle. Tata Motors was established in 1945 Listed on the New York Stock Exchange in 2004. It is the 5th largest medium and heavy commercial vehicle manufacturer in the world. listed in BSE, NSE & NYSE. Subsidiaries JAGUAR CARS LAND ROVER TATA DAEWOO COMMERCIAL

JAGUAR OVERVIEW
JLR was a part of Ford's Premier Automotive Group (PAG) and were considered to be British icons. Jaguar was involved in the manufacture of high-end luxury cars Jaguar Cars Ltd. ( better known simply as Jaguar) is an automaker from England, United Kingdom that manufactures luxury and executive motor car. Sir William Lyons founded jaguar as the Swallow Sidecar Company in 1922, originally making motorcycle sidecars before switching to passenger cars. The name was changed to Jaguar after the second world war due to the unfavorable connotations of the SS initials.

LAND ROVER OVERVIEW

British car manufacturer founded in 1948 as a marquee of the Rover Company. Known for superior off-road and road performance 1976 1 million cars running on the road In 1994 Rover Group is taken over by BMW sold to FORD MOTORS for $ 2.75 b in 2000. Used by military for projects and expeditions, Safe but less reliable, Makeover in recent times Land Rover manufactured high-end SUVs.

WHY IS FORD SELLING?

 Reports said losses at Jaguar stood at USD 715 million in 2006. Jaguar was not 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. Ford was combining both the brands since the products and manufacturing of vehicles for Land Rover and Jaguar was so intertwined.

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 Indias Tata Motors and M&M arrive as top bidders ($ 2.3b & $ 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

THE DEAL
100% stake in Jaguar & land Rover Business

TAMO has acquired the business & initially they will be operated independently of the partner. These are well invested plants 4-5000 engineers engaged in testing ,prototype design & powertrain Engineering , development & integration

3 Plants in UK 2 advanced design & engineering center

26 National sales company

Intellectual property rights Capital Allowance Support from Ford Motor Credit Pension Contributed by Ford

Both existing national sales companies of jaguar/land rover & also those that are carved out of current Ford operation
This covers all key technologies to be transferred to JLR & perpetual royalty free license on technologies shared with Ford 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

WHY TATA BUYING?

 Tata wanted to make a global impact and it thinks that buying these brands at a lower rate now, will give better value later on. This acquisition also eases the entry of Tata in European market which it has been eyeing for long. Reduce the company dependence on the Indian market which accounted for 90% of its sales Opportunity to spread its business across different customer segment At the price staring from 63 lakh and going upto 93 lakh, it seems Tata has just got the right place to compete with the current market leaders in luxury brands BMW, Audi, Mercedes Publicity on an international scale Access to large distribution network JLR had many new models lined up for next 3 years, so no much work just profits Strong R & D culture and facilities

PROBLEMS IN THE DOMESTIC MARKET

 The profits for the first quarter for the year 2008-09 were at 3.26 billion Q3 the sales of passenger vehicles went down to 41,287 units a drop of 14.14% Tata Motors cut production across different categories.

POST MERGER

Following 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 extended from 45 to 60 days in line with industry standard. 3] Receivables reduced by 133 million from 38 to 27 days. 4] Inventory reduced by 217m between June 2008 and March 2009 from 70 to 50 days . 5] Labor actions - Voluntary retirement to 600 employees. - Agency staff reduced by 800. -Offered leaves to 300 workers of Bromwhich and solihull plant. -Additional 450 job cuts including 300 managers. 6] Agreement with Unions to implement pay freeze and longer working hours (equivalent to approximately 20% reduction in labor costs.) 7] Engineering and capital spending efficiencies. 8] Fixed marketing and selling costs reduced in line with sales volume. 9] Reduction in all other non-personnel related overhead costs.

SWOT

Strengths:
Tatas strong management capability Strong monetary base to invest

Weaknesses:
Jaguars declining sales record Inexperience of handling such luxury brands

Opportunities:

Tatas Jaguar Land Rover Acquisition

Threats

Support from Ford in terms of Technology, Engine, IT, Accounting

Adding up of luxury brands in the product line Access to European Market

Market is volatile and driven by new products Strong presence of competitors like Mercedes, BMW, Lexus and Infinity

DEMERGER

OVERVIEW OF HERO & HONDA

HERO INTRODUCTION
Established in 1956 at Ludhiana. Production capacity has increased from the initial 15 bicycles per day to 18500 bicycles per day. In 1986 entered the Guinness Books of World Records as the largest bicycle manufacturer in the world. Has diversified into newer segments like Information Technology, IT Enabled Services and Financial Services.

ABOUT HONDA
HMC initial plans called for both two-wheeler market and the electric generator market. HMC first chose Kinetic Engineering Ltd. And formed Kinetic Honda Motors Ltd. But this JV would work in field of Scooters Manufacturing. HMC came to Hero Group as the Last compromise choice for its motorcycle venture.

REASONS FOR HONDA SELECTING THE HERO GROUP

Its engineering capability Relevance and salience of HERO brand. Distribution network. Commitment to Quality. Know-how and experience in handling large volume production and distribution. Tight focus on financial and raw material processes. Cordial Industrial Relations.

THE DEAL OF HERO HONDA

THE DEAL (JUNE 1984)

Honda agreed to provide tech. know-how to HHM and setting up manufacturing facilities. This included the future R & D efforts. Honda agreed for a lump sum fee of $500,000 & 4% royalty on SP. Both Partners held 26% of the equity with other 26% sold to the public and the rest held to financial institutions.

REASONS FOR SUCCESS

 The deep penetration network of hero largely benefited the sales. Absence of major competitors in initial years. Sound and proven technical capabilities of Honda and the reliability of Hero. Increased market for motorcycles: Better Fuel efficiency. Change in peoples perception. Decrease in price difference with scooters

DEMERGER

 Relaxed govt. norms Enough knowledge of Indian market for honda Indian 2 wheeler market soon to grow in double digits and carrying a partner could be a burden Honda would want to go on its own because the 9.3-million two-wheeler market will grow to 16 million by 2015 A minority stake in Hero Honda also yields limited profits for Honda compared with a fully consolidated 100 percent unit.

THE PROCESS OF DEMERGER

 To buy out Hondas 26 per cent share, first Hero has to find bankers who can finance this deal worth Rs 9,300 crore. Then it will create a special purpose vehicle (SPV), where shares will be sold to investors, who will indirectly get dividends from Hero Motors, once it uses the funds to pay back the loans. These investors will get board seats in return. All the dividends will then be paid to these investors and will flow into the SPV.

THE IMPACT OF DEMERGER

 The Hero group to lose market share, currently around 40-50 percent, in the long term as Honda becomes more aggressive. A rise in royalty payments, would hit profits at Hero Honda ( currently at around 2-3 percent of sales) The Hero Honda brand name will be changed over time the company can now establish distribution networks across the globe. It would take time for Hero to develop its own technological capabilities, and it remains to be seen whether the partners' technology licensing would continue through 2014 as agreed under the current contract. For Honda, with a wholly owned unit already in place and expanding fast, a pull-out from the joint venture would be positive for its growth over the long term, although it would have to make sure its sales network is sufficiently robust to compete with Hero