Merger
&
Acquisition
Presented By:-
Niraj Mistry
Dhaval Mehta
Hardik Sondagar
Ashish Soni
JLR-One more step towards a Global
Footprint
Tata Motors' Acquisition of Jaguar and
Land Rover
AGENDA
1. Acquisition of British Icons
2. British Marques under Ford
3. Ford Sells JLR
4. The Deal
5. The Benefits
6. The Challenges
7. The Road Ahead
Tata Motors' Acquisition of Jaguar and
Land Rover
When: In June 2008.
Acquired whom: Jaguar and Land Rover (JLR) from the US-
based Ford Motors
Price: US$ 2.3 billion.
Why:
1. the acquisition would help the company acquire a global
footprint
2. enter the high-end premier segment of the global automobile
market. After the acquisition, Tata Motors would own the world's
cheapest car. the US $ 2,500 Nano, and luxury marquees like the
Jaguar and Land Rover
TATA MOTORs COMPANY PROFILE
Formerly known as TELCO, headquartered in Mumbai.
Part of the Tata Group, and one of the world's largest
manufacturers of commercial vehicles
Tata group is 150 years old
India’s largest passenger automobile and commercial
vehicle.
Tata Motors was established in 1945.
Listed on the New York Stock Exchange in 2004.
About JAGUAR
1922 - Founded in
Blackpool as Swallow
Sidecar company
1984 - Floated off as a
separate co in the stock
market
1990 - Taken over by Ford .
Ford acquired Jaguar for
$2.5 billion in 1989.
About Land rover
Land Rover is an all-terrain vehicle and
Multi Purpose Vehicle(MPV) manufacturer,
based in Solihull, West Midlands.
It is Known for superior off-road
performance, Used by military for projects
and expeditions,
Founded in 1948 as a marquee of the Rover
Company.
In 1994 Rover Group was taken over by
BMW & sold to FORD MOTORS for $2.75
billion in 2000.
Why is Ford selling?
Ford made losses of 12.6 billion in the year 2006
The result of bad performance of Jaguar. Jaguar has been a dog i.e. it
has not been able to provide any profit for ford because of the high
manufacturing costs provided in the United Kingdom.
The strong boy Land Rover's profit, on the other hand, was driven by
the record sale of 2.26 lakh vehicles, an 18% YoY growth in 2007..
Bringing down production costs and turning around the company
successfully will be the challenge,” analysts said.
It was a test that Ford failed.
Ford announced for a combined sale
of both Jaguar and Land Rover
WHY tata motors acquireD j.l.r ?
Opportunity to spread its business across different
geographies and across different customer segments.
Long term strategic commitment to automotive sector.
Opportunity to participate in two fast growing auto segments.
Jaguar offers a range of “performance/luxury” vehicles to
broaden the brand portfolio.
Reduce the company's dependence on the Indian market,
which accounted for 90% of its sales.
Good research and development facilities at a reasonable
price.
Acquiring JLR would help TATA for Component sourcing ,
design services and low cost engineering.
Corus being the major supplier of automotive steel to JLR.
TATA MOTORs– JLR deal
process
12/06/2007- Announcement from Ford that it plans to sell Land
Rover and Jaguar.
August 2007 - Major bidders are identified
Likely buyers: Tata Motors, M&M, Ceribrus capital Management,
TPG Capital, Apollo Management
India’s Tata Motors and M&M arrive as top bidders ($ 2.05b & $
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 :What Tata had got ???
100% stake in TAMO has acquired the business & initially they will be
Jaguar & land operated independently of the partner.
Rover Business
3 Plants in UK These are well invested plants
2 advanced 4-5000 engineers engaged in testing ,prototype design &
design & powertrain
engineering Engineering , development & integration
center
26 National sales Both existing national sales companies of jaguar/land rover
company & also those that are carved out of current Ford operation
Intellectual This covers all key technologies to be transferred to JLR &
property rights perpetual royalty free license on technologies shared with
Ford
Support from Ford Motor Credit will continue to support the sales of JLR
Ford Motor Credit for around next 12 months
Pension Ford will contribute $ 600 mn of the Pension Fund
Contributed by
Ford
The Real Picture..
Consumer demand dropped
Automotive sector in India
suffered contraction in demand
Launch of Nano delayed
Tata Motors reeling under a huge
debt burden
Problems in the Domestic Market
Post acquisition:-
COMPETITIVE ADVANTAGE C
O
Tata auto component
– Flagship company of TAMO’s
Tata Steel - Corus S
- Leader in automotive grade
ancillary biz
– Manufacturing, Engineering and
steel in the European markets T
– 16% of revenue from auto
Supply
steel division
chain management
– Customers include Global OEMs
– Enjoys “Q1” supplier status S
with Ford to supply steel for
like Ford, Daimler, Chrysler, FIAT
Jaguar and Land Rover Y
Tata Consultancy Services JLR N
E
– Provides services like engineering INCATE
design, - Provides services like supplier R
manufacturing solutions and sourcing
programs,
services
- consulting services and global
G
– Automotive division accounted for
15%
sourcing I
- Major customers are Chrysler,
revenues
Ford, GM, Honda and Nissan
E
– Major customers are Chrysler, Ford,
GM S
COMPETITIVE ADVANTAGE
Tata motors raised a bridge loan of US $ 3 billion through syndicate of
banks.
Additional amount of US $ 0.7 billion was for engine and component supply,
contingencies and working capital.
The amount was repaid in following manner
Rs 1.92 billion Underwriting agreement with JM financial consultants
Rs 1.75 billion was raised through a deposit scheme from the public
Additional subscriptions by promoter companies- Tata sons, Tata capital
and Tata Investment Ltd.
Fund Raising
(7200 Crore)
Ordinary Equity Shares A-Class Equity Shares 5 Year 0.5% Convertible Preference
Shares
Full Voting Right 1 Vote for every 10 A-Class Optionally convertible into A equity
(2200 Crore) Equity Shares shares after 3years but before 5years
(2000 Crore) from the date of allotment
(3000 Crore)
* This is the first time a major Indian Co.
is raising money by issuing shares with
differential voting rights
Cost Rationalization
Single shifts and down time at all three UK assembly plants.
Supplier payment terms extended from 45 to 60 days in line with industry
standard.
Inventory reduced by £217m between June 2008 and March 2009 from 70
to 50 days .
Labor actions –
- Voluntary retirement to 600 employees.
- Agency staff reduced by 800.
-Offered leaves to 300 workers of Brom which and solihull plant.
-Additional 450 job cuts including 300 managers.
Agreement with Unions to implement a longer working hours
(equivalent to approximately 20% reduction in labor costs.)
Fixed marketing and selling costs reduced in line with sales volume.
Reduction in all other non-personnel related overhead costs.
Problems
FALL IN SHARE PRICE
DEBT BURDEN
STRONG COMPETITION
INEXPERIENCE IN HANDLING LUXURY
BRANDS
JAGUAR WAS A LOSS MAKING UNIT AND
LANDROVER HAD DECLINING SALES.
Swot
Strengths:
Weaknesses:
*Tata’s strong management *Jaguar’s declining sales record
capability Inexperience of handling such
*Strong monetary base to invest luxury brands
Tata’s Jaguar
Land Rover
Acquisition
Opportunities: threats:
* Support from Ford in terms of
Technology, Engine, IT, Accounting * Market is volatile and driven by
* Adding up of luxury brands in the new products
product line * Strong presence of competitors
* Access to European Market like Mercedes, BMW, Lexus
and Infinity
CURRENT STATUS
Jaguar land rover sales continued their upward trend since launch in June
2009.
During the quarter ended June 2010 JLR generated a profit of Rs 1613
crore.
Jaguar Land Rover is now a strong, profitable and innovative competitor in
the premium car industry.
26% Delivery Growth.
JAGUAR LANDROVER global sales in July 2010 were 19,386 vehicles,
higher by 30%. Jaguar sales for the month were 5,676, higher by 26%, while
Land Rover sales were 13,710, higher by 31%.
Recently TATA MOTORS drove past Reliance Industries to top the
2010edition of India’s Most Valuable Brands survey with a valuation of
$8.45billion. A major part of this success can be attributed to the JAGUAR
AND LANDROVER.
Tata Motors JLR Turnaround
Experts believed that it was not a right move for Tata Motors.
Negative stock markets reaction due to acquistion
However, Tata Motors turned fortunes into gold.
Infact, in 2009, Tata Motors suffered an annual loss of over half
a Billion dollars due to slump in Land Rover & Jaguar sales – It
really looked like Tata Motors had put a foot wrong with JLR
deal.
But recently Tata Motors announced its annual profits - more
than 80 % of annual profits came from the JLR unit alone.
Before acquisition, Jaguar & Land Rover had annual sales
figures of 50,000 cars. In just 3 short years, Tata Motors has
managed to sell a whooping 244,000 Jaguar & Land Rover cars
globally!
Future Plans
Grow the business through new
products & market expansion
Started assembling Land Rover vehicles at Pune
Plant
The company is also seeking to establish a
manufacturing base in China and Brazil.
JLR to spend 8.2 mn over the next 5 years to compete
more effectively with Audi, BMW, Mercedes Benz
Transform the business structure to deliver sustainable
returns
Investment in product development and technology to
maintain high quality
The company aims to increase its marketing and
dealer network in emerging markets like Russia, China,
India, and the Middle East
