Tata’s Jaguar acquisition and Ferrari ride

in depth analysis on TATA acquistion of Ford’s Jaguar and Land Rover

Tata group which is responsible for India’s biggest foreign takeover, by acquiring the British steel company Corus through his Tata Steel business for £6.7bn earlier this year, is now reckoning for another big acquisition, this time for its automotive division. Tata Motors is in the early stages of evaluating a bid for the Jaguar and Land Rover reported British daily The Telegraph.. Ratan Tata is understood to have instructed advisers in the past fortnight to begin evaluating the merits of a joint offer for Jaguar and Land Rover, which have been earmarked for disposal by struggling American car giant Ford. People close to the situation last night said that Tata Motors’ evaluation of a bid was at an “exploratory” stage and may not lead to a formal bid for the two brands. One person familiar with the position said that Tata Motors had signed a confidentiality agreement with Ford in recent days. .Besides Tata, other car makers from middle east and eastern car manufacturers may be interested in bidding, while a formal auction would also be likely to attract private equity firms such as Apollo, Blackstone and Cerberus ( theUS buyout firm which acquired Chrysler earlier this year for $7.5bn).

Price of the luxury brands:

Analyst believe anything between $2.5bn to $3bn for jaguar and Land Rover. Here is their words

A Meryll Lynch analysts suggest that Jaguar and Land Rover may fetch about $1.5bn (£735m). Earlier a private equity firm called Alchemy Partners was said to be lining up a £3bn offer for the two luxury brands. “If you look at the financial position, [Jaguar and Land Rover] are worth some $1bn to $1.5bn,” Mr Dorris an analyst said. “Add a control premium, and the final sales price could come in at about $2.5bn.”

Ford bought Jaguar for £1.6bn in 1989 and it is believed that Ford have invested about $10bn in Jaguar since it bought, Ford bought the Land Rover from BMW for £1.7bn in 2000.

What may hamper Tata’s?

  • Union leaders of both Jaguar and Land Rover have already raised concerns about their job security because of the sale.
  • Jaguar’s sales were down nearly 32 percent for 2006 in the United States, the company’s largest market.
  • Jaguar lost more than $715 million last year and is expected to lose $550 million in 2007. According to the analysis, Jaguar is projected to lose more than $300 million in 2008 and is not expecting a profit for several years. These losses are mainly because of extremely high manufacturing costs in Britain and Ford has not earn a profit from jaguar since it bought.
  • Land Rover sold a record 192,500 vehicles in 2006 and is said to be profitable. Unlike the jaguar, Land Rover is a much stronger and more profitable business but Tata’s has to buy both the units since the products and manufacturing of vehicles for Land Rover and Jaguar is so intertwined..
  • The worried jaguar ‘s workers, they told “if the two companies are sold together, then there was no guarantee “that a new owner would not shut down most of Jag’s manufacturing capacity”.

Official Words from Tata and Ford…

A spokesman for Tata Motors said the group did “not comment on speculation about mergers and acquisitions”. Though Ford denied it, Ford had told that it was still some way from doing a deal, it also added hat it had been looking at its options for a year, and that it was neither setting a timeframe for any decision, nor ruling out any options.

is Mahindra in the race?

Mahindra & Mahindra (M&M) might also show interest in these brand. 

M&M which wants to be global SUV maker should have an interest, at least, in Land Rover, says the brand is attractive. Even so, it will not help Mahindra become an independent global sports utility vehicle, or SUV, brand. Moreover, Land Rover, which is about six times as big as M&M, might simply be unaffordable.  

I do not know what is on offer, whether it is the whole brand, or some products or what plants are being offered. I cannot say if it is a strategic fit or not. Mahindra is a SUV brand and Land Rover is an SUV brand. So, the two brands have something where synergy is possible. But having said that, its a big company,” said Pawan Goenka, President-Automotive Sector, Mahindra & Mahindra.

European car manufacturers Renault and Fiat have recently ruled out of the possibility of bidding for Jaguar and Land Rover.Ford – the struggling auto giant:

Ford which has become struggling automaker in recent years posted a full-year 2006 net loss of $12.7 billion, the largest single-year loss in the company’s history. Also Ford lost its No. 2 ranking worldwide to Japan’s Toyota. Ford Chief Executive Officer Alan Mulally, who took over the top post in September 2006 from Bill Ford has been restructuring Ford to counter losses. As a part of restructuring Ford has been selling assets in a bid to offset falling sales and profits. Premier Group, which includes Aston Martin, Volvo,Land Rover and Jaguar is the main cause for Ford continuing losses. Earlier this year Ford sold its UK based sports car division Aston Martin(popularly known as james bond car) for $848 million to investors led by U.K. auto-racing champion David Richards. Many believed that Ford was in talks with Germany’s BMW to divest the Volvo brand but Ford denied any such sale of Volvo. Ford reported a loss of $282m for the first three months of 2007.

Tata’s Ferrari ride:

Soon we can see the Ferraris cruising in India roads, as an extension of the existing Tata-Fiat(parent company of Ferrari) partnership, Fiat is planning to drive Ferrari into India and its navigator will be the Tata Motors. The world’s favourite sports car – Ferrari will zoom into India’s exclusive sports car market currently dominated by porsche. The two new Ferraris to be launched in India would be a 612 Grand Tourer, a big four seater and F430, an absolute sports car which is performance oriented. Tata Motors will market and set up engineering centers as a post sale services for these cars.

After some bad experiences in China and Russia, Ferrari did not want to take chances by going it alone. With Tatas in fold, the Italian major is expecting a solid infrastructure back up in India. Ferrari and Tata are natural partners because Ferrari already gets lot of its software done from TCS.

source: NDTV profit

Tata’s to setup production base in Thailand:

Tata Motors, India’s top commercial vehicle maker, will invest 1.3 billion baht (38 million dollars) to launch its first production base in Thailand, the Thai Board of Investment said on July 18th. Tata Motors plans to roll out one-tonne pick-up trucks by the end of this year with initial output capacity of 7,000 units per year, the state-run investment promotion agency said. Tata Motors aims to boost annual production capacity to 30,000-35,000 units over the next five years, with 80 percent of light pick-up trucks to be sold in Thailand and the rest for export, the agency said.

17 thoughts on “Tata’s Jaguar acquisition and Ferrari ride”

  1. that is a good summarisation of the news,i think you did not left a single thing.thats great.good and keep it up!!

  2. Jaguar update:

    Ford Motor Co.is aiming at a tentative deal to sell its Land Rover and Jaguar operations by September 30, and a pact to dispose of Volvo by the year-end, the New York Times reported on its Web site. Financial and legal advisers to Ford have begun preparing the information that bidders want to see before making opening offers for Land Rover and Jaguar.

    source:Newyorktimes

  3. Jaguar Update 1:

    Why Ford needs to retain stake:

    superficial cause:

    Ford is planning to retain a 30-50% holding in the Jaguar and Land Rover businesses, the backbone of Ford’s luxury stable. This surprise move from Ford is to ease the pressure mounting on it by trade unions and the British government. Ford is already seeking assurances that whoever buys the two firms will keep all the UK factories, Coventry, Birmingham, Liverpool for Jaguar and West Midlands for Land Rover—open for at least five years to safeguard UK jobs. It also mirrors similar deals that global car makers have announced in recent months. When Ford sold Aston Martin in May this year to a Kuwait-based consortium of bankers for $925 million, it chose to retain a 15% stake. Daimler too retained a 20% stake in Chrysler when it was sold to private equity firm Cerberus Capital Management for $7.5 billion the same month.

    Real cause:

    * But Ford’s new move is seen as an effort to keep private-equity buyers involved and ratchet up competition. Since current turmoil in the debt markets, where private-equity firms often turn to fund their deals would result in lesser interest from them.

    * Also the important reason is to woo several private-equity firms participated in the first round of bidding who are now wary of stricter European Union emission norms scheduled to take effect in 2012. Jaguar and Land Rover — niche makers of sports cars and sport-utility vehicles, respectively — will be hurt because they don’t have broader fleets including more-fuel-efficient cars to offset their less-efficient models. Also since unlike another car company, private-equity bidders likely won’t have other auto operations, especially any with more-efficient vehicles that could bring down a fleet fuel-economy average. The commission enacting emission norms has said it intends to require Europe’s car makers to reduce the average carbon-dioxide levels of new cars by roughly 20% over current levels to 130 grams per kilometer by 2012, it hasn’t specified how this will be enforced. The EU could apply its 2012 target to the industry as a whole, with some car makers compensating for others, or it could make the target binding on each company’s fleet of vehicles. A binding mandate could challenge niche brands such as Jaguar and Land Rover. By retaining a stake, Ford might be able to assuage the concerns of prospective buyers, as the relatively low emissions levels of Ford’s small cars sold in Europe could offset the higher emissions of Jaguar and Land Rover models, depending on how the new rules are crafted.

    Bidders way:

    OAO Russian Machines, which owns the OAO GAZ car group, said in a statement on its website that it is not interested in acquiring the Ford Motor Co’s Land Rover and Jaguar brands. GAZ appeared in a number of press reports as one of the parties that expressed interest in buying them.

    Jacques Nasser, the former Ford chief executive, who is bidding for the iconic brands along with One Equity Partners, the private equity firm owned by JP Morgan Chase, is reportedly flying to Britain, in a bid to woo the unions.

    source:Economictimes, Wall Street Journal

  4. Majors allies with private equity players:

    The race for Land Rover and Jaguar is hotting up and Indian bidders Tata Motors and Mahindra & Mahindra looking for a strong global footprint with the two marquee brands. he subprime virus has taken the sheen off global credit markets and the Tatas and Mahindras are reworking their strategies to make sure that the rising risks associated with big-ticket global deals are shared with private equity partners.

    As part of this de-risking strategy, the Mahindras have already initiated talks with the New York-based Apollo Management to work out possibilities of a joint bid. The Tatas are working on similar alliances with Cerberus Capital Management. (similarly Tata Motors + Fiat has allied with a private equity firm CVC for the US-auto maker Paccar deal ) .Such deals make sure that the automobile maker takes care of the operational risks while the financial risks are shared between the partners. Partnerships like these will also serve the critical objective of limiting competition as both Apollo and Cerberus had expressed their interest to buyout Land Rover and Jaguar. Texas Pacific, One Equity Partners and Ripplewood are the three other private equity firms in the race for Land Rover and Jaguar.

    source:NDTV Profit

  5. Mahindra & Mahindra doing due diligence – Financial Times: Mahindra & Mahindra Ltd is doing due diligence on Ford’s Jaguar and Land Rover units, the Financial Times said on Thursday, citing people close to the situation. Mahindra was more interested in utility maker Land Rover, but Ford planned to bundle the sale of Land Rover together with luxury marque Jaguar, the FT reported. “Terms of a deal would very likely prevent the spinning off of Jaguar,” the paper said. Mahindra is believed to be keen only on Land Rover, as it would address the need for a premium sport utility in its line-up, while Jaguar would not fit as well. Mahindra is taking its Scorpio SUV to more overseas markets including the United States, where it will sell from 2008. Ford said last week it planned to have more details on the sale by the end of 2007 or early 2008. source: Financial Times

  6. Tata group has set its sight on another pair of iconic British brands – Land Rover and Jaguar. The Tata group is set for a battle royal with One Equity, the private-equity arm of American bank JP Morgan, over Jaguar and Land Rover, the two British marques that have been put up for sale by Ford. Second-round bids for the famous brands are due on Monday(october 29th) and sources said the field, currently comprising six contenders, is likely to be narrowed to two. The Tata Group, headed by Ratan Tata, is expected to lead the race, but will face stiff competition from One Equity, The One Equity bid is being led by Jac Nasser, the former chief executive of Ford. All interested parties have toured the two companies’ plants and seen the new Jaguar XF, a model that will go on sale in March and is regarded as crucial to the marque’s future. According to the report, the sale has been complicated by delays in striking future supply agreements with Ford, which provides engines to both marques, and by uncertainty over European Commission plans for a limit on carbon-dioxide emissions. The mooted limits would make life difficult for the companies’ new owner, as Jaguar and Land Rover models tend to have high carbon-dioxide emissions. The sale of Jaguar and Land Rover is part of a radical reshaping of Ford, which is struggling to return to profitability in the face of crippling healthcare and pension costs and competition from foreign carmakers. source: Sunday Times.

  7. Tata jaguar update (November 02) Tata Group is understood to be leading the race to buy Land Rover and Jaguar after the second-round bidding in the auction of Ford’s British marques closed on Friday. The conglomerate, which includes India’s third largest carmaker, is believed to have submitted a detailed offer of more than two billion dollars. Other bidders include private equity firms One Equity Partners and Ripplewood Holdings. Jaguar and Land Rover plants in the Midlands employ about 20,000 people.

  8. its Tata Vs Mahindra (Novemaber 14th) The battle for iconic British car brands, Jaguar and Land Rover, is set to be fought between two Indian firms. Ford Motor Co, the owner of the two brands, is believed to have narrowed the auction to three bids. Apart from the Tatas and Mahindra & Mahindra, One Equity Partners, a buyout firm funded by US investment bank JP Morgan, is on the final leg of the race.Ford is struggling with declining sales and a falling US market share and announced last week it was nearing a deal to shed Jaguar and Land Rover. At the time it posted a third-quarter net loss of $380 million, compared with losses of $5.2 billion a year earlier. Ford has been exploring the sale of the brands since June as it continues a global strategic review, which led in March to the sale of Aston Martin to a Kuwait-backed consortium. Mahindra & Mahindra, India’s top utility vehicle and tractor maker, initially pulled out of the process because it was only interested in Rover, whereas Ford wants to sell them together.The company rejoined the auction after partnering with Apollo in a break-up bid that would give each one of the brands. Tata Motors, India’s top vehicle maker, has a joint venture with Fiat to make cars. Ford invited six second-round offers earlier this month, people familiar with the matter said at the time. It has now evaluated them and selected the three parties it wants to fight for the businesses, the sources said. One of the sources said the bidders are now expected to enter talks with trade unions and the UK government about conserving jobs amid speculation some of the bidders may try to move production outside the UK.”We expect an agreement by early next year at the latest,” a spokesman for Ford said. Ford declined to comment further. Buyout firms TPG, Terra Firma and Ripplewood were among suitors that were expected to make second-round offers but were not on the third-round shortlist. Merrill Lynch analyst John Murphy at the time had valued the two brands at as much as $1.5 billion combine source:Hindustan Times

  9. TATAS don’t have a good reputation in Quality; their first indigenously developed car had 50,000 cancellations due to Quality problems. If Jaguar and Land Rover were to fall in the hands of TATA, they might do anything to cut corners and make profit including outsourcing the component manufacturing to their ultra cheap car manufacturing plant in Singur India. It is a pity that both the luxury marquees are grabbed by a business group which has a reputation of questionable ethics & business practices. These luxury brands does not fit the profile of a mass market & ultra cheap car manufacturer, The only possible reason for this acquisition is that TATA’s are desperately trying to move their Money out of the Indian Economy. It is a pity that the unions trust TATA’s over the rest of the bidders. Incidentally this is the same company which grabbed the lands of poor farmers in Singur India, at prices far below the market value for setting the world’s first ultra cheap sub $2500 “Peoples Car” Plant. This plant was setup at the cost of the lively hood of thousands of farmers, several of whom had committed suicides. These suicides and protests by thousands farmers against TATA’s car plant happening in a so called 3’rd world country like India hardly make it to the International Media. There is a class action law suit filed against TATA’s in US by their immigrant employees for cheating their TAX refunds (TATA’s had illegally taken away the tax refund checks given by IRS) and had denying them any benefits like paid leave or overtime. It would be just a matter of time before TATA’s show their true color to the 13,000 unionized workers of jaguar plants. http://jaguarlandrover.blogspot.com

  10. I would like to reply for Mr. Alge. I want to just reply to the comments of Mr. Alge. I dont know whether he is from India or some other country. For your information, TATA Motors was mostly concentrating on trucks and not any passenger cars till the late 90’s. It was only in 1998, when their first passenger hatchback TATA Indica came into market – they started their business with passenger car. Like any new comer to the industry, compairing with other world brands, ‘YES’ there were some quality issues with the first version of their cars. But in the past few years, may be with the partnership with the FIAT – they have made tremendous improvement in quality, and in 2006 they celebrated the 10 Millionth Indica being sold. So regarding the quality stuff, am damn sure that they will try to cut down cost by compromising quality. Then regarding the work ethics, they are reported to be one of the most employee friendly group in the entire Industry. So there is no point in doubting that they may do something bad to the employees of Jaguar and Land Rover. So please do some detailed research before making such comments.

  11. 1. The Singur land was provided by State Government to TATA, it was not grabbed by TATA’s. 2. TATA group is the most ethical business group in India. 3. Possible reason of aquisition are a. Global expansion motive of TATA group as seen in CORUS takeover. b. US recession…..and hence a bit less inexpensive value for such a big brand. 4. Its not a pity that union trust TATAs, but it is a pity that some blokes are uninformed and put comments without enough evidence.

  12. This is a reply abt Mr Alges comment: Please read about TATA SONS and then make comment. The way you have written shows clearly that you dont know anything about the company. TATA SONS believed in changing INdia money and name was the endresult.,

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  14. tata already not in good shape because market largely dominated by koreans(hyundai) and japanese(maruti suzuki & honda).and tata’s acquisition of jaguar an rover will also do the effect of oil in fire…. i think it would take some time for settling of the new companies…tata will have to wait so that fruits will ripen and maximum advantage can be obtained…….

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