Tata’s Acquisition of Jaguar

& Land Rover

Presented by
Apar Setia
TATA MOTORS
(A BRIEF VIEW)
 JAGUAR
 1922 - Founded in Blackpool as Swallow Sidecar
company.
 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.
 Ford’s formula one entry since 1990s.
 Jaguar - the sleek car which dates back to 1935.
 It has been less profitable for Ford since it was bought in
1989. Its vehicles are made at three plants across central
and northwest England, while famous models have
included the E-type and the long-running XJ series.
 LANDROVER
 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
 Known for superior off-road performance
 Used by military for projects and expeditions
 Safe but less reliable
 Makeover in recent times
 Tata Motor’s Product Profile

Tata Motors

Passenger Utility
Cars Vehicles Trucks Buses Defense
Vehicles
Indica V2
Safari Dicor Medium and Heavy – Tata
Starbus and Globus
Indica V2 Turbo
Indica V2 Xeta
Indica V2 Dicor
Novus
Indigo XL
Indigo
Sumo Grande Intermediate
Light – TL 4x4
Other Buses
Indigo Marina
Indigo CS
Fiat Cars Sumo Small
Profitability Trend of Tata Motors
Tata Motors Limited is India's largest automobile company, with
revenues of Rs. 943,124 millions and profits 25,711 millions in 2009-
10.
It is the leader by far in commercial vehicles in each segment, and the
second largest in the passenger vehicles market.
The company is the world's fifth largest medium and heavy
commercial vehicle manufacturer, and the world's second largest
medium and heavy bus manufacturer.
Tata Motors
Year ended Year ended Year ended Year ended Year ended
31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06
Rs (m)          
Revenue/
sales 943,124 716,799 359,276 325,144 240,130
Operating/
trading
income 35,226 -21,293 30,863 30,880 23,490
Net income 25,711 -25,053 21,677 21,700 17,281
Shareholders'
equity 82,065 59,406 86,975 77,217 61,315
Long-term
debt 351,924 349,739 115,849 73,019 33,791
Market
capitalisation n/a 103,694 322,469 280,446 357,018
Employees
(number) 24,310 23,638 23,000 22,349 29,606
Source: Company reports, Financial Times
 Ford Motor Company

 Founded by Henry Ford in 16th June, 1903 in Michigan,

USA and current CEO: Alan Mulally .
 Location: Dearborn, Michigan
 Competitors: General Motors, Toyota
 Brand names: Lincoln, Mercury, Volvo, Mazda, Jaguar
and Land Rover
 World’s Third Largest automaker based on world-wide
vehicle sales in 2009.
 In 2009, Ford became the third-ranked automaker in US
sales after General Motors and Toyota, falling from the
second-ranked automaker slot for the first time in the
previous 58 years.
Ford Motor’s Product Profile

Ford

Cars SUVs Trucks

 TATA MOTOR– JLR Deal process
• 12th june 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)
• 3rd January 2008 – Ford announces Tata’s as the preferred
bidders.
• 26th march 2008 - Ford agreed to sell their Jaguar Land
Rover operations to Tata Motors.
• 2nd June 2008 – The acquisition was complete.

Tata Motors purchased Jaguar & Land

Rover for $2.3bn in 26 June 2008
 Now TATA Owns:-
TAMO has acquired 100% stake in Jaguar and Land Rover business
and initially they will be operated independently of the parent.
3 plants in UK with full investment.
2 advanced design and engineering centers consist of 4-5000
engineers engaged in testing, prototype building, design and
powertrain engineering, development and integration.
26 national sales companies including both existing national sales
companies of Jaguar/Land Rover and also those that are to be carved
out of the current Ford operations.
Intellectual property rights cover all key technologies to be transferred
to JLR and perpetual royalty free licenses on technologies shared with
Ford.
Ford Motor credit continued to support the sales of Jaguar and Land
Rover for around another 12 months.
Ford will contributed $ 600mn to the pension fund and the next
actuarial valuation took place only in April 2009.
Reason for deal
 Reason for deal
 Ford purchased Jaguar in 1989 in a bidding with General Motors
paying 2.5billion dollars and Land Rover was sold by BMW to
Ford Motor Company for 2.7billion dollars in 2000.
 Jaguar sales in the U.S. were down by 25.7% in May 2007 from
the same period a year ago. Land Rover sales were down
by1.8% despite having an entirely new model, the LR2, on sale.
 Jaguar sales dropped 33% in the US and Europe in the first two
months of 2008 and Land Rover sales fell 13% in the US and
around 7.7% in Europe during the same period.
 Ford has lost 15.3 billion dollars over the past two years and
responded by shuttering plants and slashing its workforce in
North America by more than 40,000 workers.
 Ford is getting less than half what it paid for the two brands
from others.
 Objectives of TATA
 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.
 Actual Funding
 Tata Motors raised $3 billion (about Rs 12,000 crore)
through bridge loans for 15 months from a clutch of
banks, including JP Morgan, Citigroup, and State
Bank of India.

 Company charted out plans to raised Rs 7,200 crore,

via Rights Issue. The proceeds of which were be used
to part-finance the JLR deal of Rs 9,228.75 cr.

 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
 Tata Motor’s Strategy to Fund JLR Deal

Fund Raising
(7200 Crore)

5 Year 0.5% Convertible

Ordinary Equity Shares A-Class Equity Shares
Preference Shares
 Threats:
•Ma rket i s vol a ti le an d dr ive n by new
pr oduc ts.
•Str ong presenc e of c ompet it ors l ike
Merce de s, BMW, L exus a nd I nf init y.
SWOT Analysis
 Problems After Acquisition
 Drop in share prices.
 Failure of rights issue.
 Huge debt burden.
 Sales volume decreased by 35.2%.
 Lack of consumer loans.
 Jaguar/Land Rover lost 306 million pounds ($504
million) for the fiscal year ending March 2009.
 Tata Motors reported a net loss of Rs3.29bn
($67 million) for the quarter to end-June 2009.
 Extremely high manufacturing costs in Britain.
 Eliminated more than 2,200 jobs.
Share prices of TAMO
 Benefits
 Tata gets access to Ford's Hybrid and low-emission powertrain technology.

 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.

 Thisacquisition also facilitate the entry of Tata in European market and reduces
the dependency on the Indian market which accounted for 90% of its sales.

 Increase
sales in emerging markets & Reduce dependence on mature markets &
Opportunity to spread its business across different customer segment.

 Publicity on an international scale & New segments for vehicles with a large
distribution network.

 JLR had many new models lined up for next 3 years, so no much work, just profits

 StrongR & D culture and facilities & Component sourcing, engineering and design
benefits.
 Current statistics
Since January 3, when Ford announced Tata Motors as the “preferred
bidder”, the Tata Motors stock has moved down from Rs 794.25 to Rs
679.4, when the deal was announced. In the two days since then, it has lost
a further 4.92 per cent to Rs 645.95.

Tata Motors reported a consolidated net profit of 19.89 billion rupees

($429.59 million) for the quarter to June 30, swinging back from a year-ago
net loss of 3.29 billion rupees. Revenues rose to 270.56 billion rupees from
164.73 billion rupees.

A Reuters poll estimated net profit at 9.8 billion rupees on net sales of
265.2 billion rupees.

During the quarter ended June, Tata Motors sold 181,708 vehicles, up 48
percent rise from a year earlier.

 The JLR unit sold 57,153 vehicles in the June quarter, up from 35,947 a
year earlier .
 Future Prospects & plans
 The Indian Automobile Market is expected to grow at a CAGR of 9.5 percent
amounting to Rs. 13,008 million by 2011.

 The liberalization policies followed by the Indian government had been inviting
foreign investors and manufacturers to participate in the car market in India.

 It is expected that by 2030, the Indian car market will be the 3rd largest car market
across the globe.

 Chairman Ratan Tata recently said in the company's annual report that it would add
more Jaguar models, including an entry-level car, a station wagon and a roadster.

 The company has begun a search to replace Ratan Tata, who is due to retire by the
end of 2012.

 The company said it was in talks with potential joint venture partners to start
assembly-line operations for the JLR brands in China. The company also plans to
start assembling Land Rover vehicles in India next year.
THANK YOU