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.

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