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A CASE OF TATA-JAGAUR

ACQUSITION

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TATA MOTORS

Formerly known as TELCO (TATA Engineering and

Locomotive Company).

Part of the Tata Group, and one of the world's largestmanufacturers of commercial vehicles.

India's largest passenger automobile and commercial vehiclemanufacturing company.

Tata Motors was established in 1945, when the companybegan manufacturing locomotives.

The company manufactured its first commercial vehicle in

1954 in a collaboration with Daimler-Benz AG, which endedin 1969.

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Company Profile

It is the 5th largest medium and heavycommercial vehicle manufacturer inthe world. listed in BSE, NSE &

NYSE.

Subsidiaries-

JAGUAR CARS LAND ROVER

TATA DAEWOO COMMERCIAL

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Jaguar

Jaguar was founded as the Swallow SidecarCompany by Sir William Lyons in 1922,originally making motorcycle sidecars.

The Jaguar name first appeared in 1935.

The company's product was - a 2.5L sedan

named the SS Jaguar, where "SS" stood for"Swallow Sidecar".

It adopted the "Jaguar" name in 1945.

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..cont Jaguar went through a lot of mergers and de-

mergers.

It bought the Daimler Motor Company, in 1960.

Jaguar merged with the British Motor Corporation(BMC) to form British Motor Holdings (BMH) in1966.

Then came the merger with Leyland in 1968,which had already acquired Rover and StandardTriumph.

The resultant entity was named the BritishLeyland Motor Corporation (BLMC).

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..cont

Jaguar was floated on the LondonStock Exchange in 1984.

Then, it was purchased by the FordMotor Company in 1990 for $2.5billion.

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TATA MOTORJAGUAR deal

process12/06/2007- Announcement from Ford that it plans to sell

Land Rover and Jaguar.

August 2007 - Major bidders were identified

Likely buyers: Tata Motors, M&M, Ceribrus capitalManagement, TPG Capital, ApolloManagement

Indias Tata Motors and M&M arrive as top bidders ($2.05b

& $1.9b)

03/01/2008 Ford announces Tatas as the preferredbidders

26/03/2008 - Ford agreed to sell their Jaguar Land Roveroperations to Tata Motors.

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Why was Ford selling?

Reports said losses at Jaguar stood at USD 715 million

in 2006. Jaguar has been a dog i.e. it has not been ableto provide any profit for ford because of the highmanufacturing 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, an18% YoY growth in 2007.

Bringing down production costs and turning around thecompany successfully was the challenge.

It was a test that Ford failed. Ford is combining both the brands since the products

and manufacturing of vehicles for Land Rover andJaguar is so intertwined.

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Why Tata acquired JLR?

Long term strategic commitment to automotive sector.

Opportunity to participate in two fast growing autosegments.

Increased business diversity across markets and products.

Land rover provides a natural fit for TMLs SUV segment.

Jaguar offers a range of performance/luxury vehicles tobroaden the brand portfolio.

Benefits from component sourcing, design services and lowcost engineering.

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Provides services likesupplier programs,consulting services andglobal outsourcing.

Customers includeChrysler, Ford, GM etc.

Provides engineering design,manufacturing solutions andsourcing services.

Major customer includeChrysler, Ford , GM etc.

Leader in the automativegrade steel.

16% of revenue fron autosteel division.

TAMO's flagshipancillary biz.

Customers inc. Ford,Daimler, FIAT etc.

TACO

TATA

Corus

INCATTCS

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Tata-JLR Merger Agreement100% stake in Jaguar& land Rover

Business

TAMO has acquired the business & initially they will be operatedindependently of the partner.

3 Plants in UK These are well invested plants

2 advanced design& engineering

center

4-5000 engineers engaged in testing, prototype design &powertrain

Engineering, development & integration.26 National salescompany

Both existing national sales companies of jaguar/land rover & alsothose that are carved out of current Ford operation

Intellectual propertyrights

This covers all key technologies to be transferred to JLR &perpetual royalty free license on technologies shared with Ford

Capital Allowance A minimum guaranteed amount of $1.1 bn which will helpmanaging in Tax going forward

Support from FordMotor Credit

Ford Motor Credit will continue to support the sales of JLR foraround next 12 months

PensionContributed by Ford

Ford will contribute $ 600 mn of the Pension Fund

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TATA - JLR deal

Tata Motors raised $3 billion (about Rs 12,000crore) through bridge loans for 15 months from aclutch of banks.

JP Morgan, Citigroup, and State Bank of India.

Tata came under cash crisis because of theCorus deal and the huge investments in the TATANano project.

The credit rating companies also took a negativeoutlook toward this deal because of the hugedebt requirement to complete the deal.

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TATA Merger with JLR

FORD

JLRTATA

MOTORS

TATAGROUP

Forward Triangular Merger

Subsidiary of TATA GROUPSubsidiary of FORD

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Type of merger

Market Extension

Cross Border

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Financial Impact

Total acquisition cost at $3bnassumed to be debt-funded onTAMOs books.

Financial Impact: Leverage increased.

Headline Debt/Equity of TAMOincreased to 2.5x from 1x.

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LEVERAGE BUYOUT - Definition

The acquisition of another company using a

significant amount of borrowed money (bonds or

loans) to meet the cost of acquisition. Often, the

assets of the company being acquired are used ascollateral for the loans in addition to the assets of

the acquiring company. The purpose of leveraged

buyouts is to allow companies to make largeacquisitions without having to commit a lot of

capital.

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Is deal really worth it?

There was immense pressure from the shareholders,analysts community etc. to abort the deal.

Because it was over priced and the balance sheet of TATAwas not in a position to absorb more loan.

Ford purchased JLR at $5 bn and sold at almost half the priceto TATA after operating it for losses for few years.

As the market would have recovered from recession thevaluation would have increased.

Tata would not have been able enter into the premiumsegment (>10 lakhs) in India.

TAMO would have lacked in robust designing capabilities.

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References

http://www.tata.com/company/releases

http://wikipedia.com

http://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-

Road-Ahead

http://domainb.com

http://www.tata.com/company/releaseshttp://wikipedia.com/http://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://domainb.com/http://domainb.com/http://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://www.123jump.com/market-analysis/Tata-and-Jaguar-Rough-Road-Aheadhttp://wikipedia.com/http://www.tata.com/company/releases

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THANK YOU

Presented By:Anurag

MBA (3rd Sem)