Tata Motors

Acquisition of
Jaguar Land Rover
Presented by:
Amit Kishore Gupta
Amrit Daspatnaik
 Jaguar: An overview
1922 - Sir William Lyons founded jaguar as the
Swallow Sidecar Company in 1922, originally
making motorcycle sidecars before switching to
passenger cars
1960 - Jaguar name first appeared after World
war II
1984 - Listed in the stock market
1990 - Taken over by Ford. JLR was a part of
Ford's Premier Automotive Group (PAG) and
were considered to be British icons.
Tata Motors Acquisition of Jaguar Land Rover
Land Rover: An overview
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 $2.75b

Tata Motors Acquisition of Jaguar Land Rover

Tata Motors: An overview
TATA Group is 150 year old, Previously Tata
Engineering and Locomotive Company (Telco)
India'slargest passenger automobile and
commercial vehicle
Tata Motors was established in 1945
Listed on the New York Stock Exchange in 2004
It is the 5th largest medium and heavy
commercial vehicle manufacturer in the world.
listed in BSE, NSE & NYSE

Tata Motors Acquisition of Jaguar Land Rover

Why was Ford selling?
The US auto major put the two marquees on the
market in 2007 after posting losses of $12.6b in
2006 - the heaviest in its 103-year history.
Jaguar was not 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.
Ford was combining both the brands since the
products and manufacturing of vehicles for Land
Rover and Jaguar was so intertwined.
Tata Motors Acquisition of Jaguar Land Rover
Why to acquire JLR?
Long term strategic commitment to
automotive sector
Opportunity to participate in two fast growing
auto segments
Increased business diversity across markets
and products
Jaguar offered a range of performance/luxury
vehicles to broaden the brand portfolio
Benefits from component sourcing, design
services and low cost engineering

Tata Motors Acquisition of Jaguar Land Rover

The Deal Process
June 2007 - Announcement from Ford that it plans to
sell Land Rover and Jaguar
August 2007 - Major bidders were identified Tata
Motors, M&M, Ceribrus Capital Management, TPG
Capital, Apollo Management
Indias Tata Motors and M&M arrived as top bidders
($ 2.05b & $ 1.9b)
Jan 2008 Ford announces Tata as the preferred
bidders
Mar 2008 - Ford agreed to sell their Jaguar Land
Rover operations to Tata Motors at $ 2.3b
June 2008The acquisition was completed

Tata Motors Acquisition of Jaguar Land Rover

The Deal Process

Tata Motors Acquisition of Jaguar Land Rover

Financing strategy
Tata Motors had a cash pile of over Rs.6,000 crore
and generated free cash of over Rs.1,000 crore
during FY07. It could easily use these reserves to
raise more funds without endangering its finances
At the end of last financial year, Tata Motors debt-
to-equity ratio was a low of 0.56x, giving it ample
head room to raise more funds
Low leverage of the auto biz provided funding
flexibility

Tata Motors Acquisition of Jaguar Land Rover

Financing strategy Cont
Raised a 15-month bridge loan of $3b
Additional amount of US $0.7b was for engine and
component supply, contingencies and working
capital
It intended to refinance the loan through long-
term funds
Valuable stakes in group companies
Owns $400m of Tata Steel
Owns stake in Tata Sons (Tata Groups holding
company) worth at least $600m

Tata Motors Acquisition of Jaguar Land Rover

The Deal of $2.3b

Tata Motors Acquisition of Jaguar Land Rover

Tata and the dream
NEED FOR GROWTH
In the past few years, the Tata group had led
the growing appetite among Indian companies
to acquire businesses overseas in Europe, the
United States, Australia and Africa - some even
several times larger - in a bid to consolidate
operations and emerge as the new
agemultinationals
Tata Motors was India's largest automobile
company, with revenues of $7.2b in 2006-07.
With over 4m Tata vehicles plying in India, it
was the leader in commercial vehicles and the
second largest in passenger vehicles
Tata Motors Acquisition of Jaguar Land Rover
Tata and the dream Cont
COMPETITIVE ADVANTAGE
Tata Motors was vulnerable to greater competition
at home
Foreign vehicle makers including Daimler, Nissan
Motor, Volvo, etc. had struck local alliances for a
bigger presence
Tata Motors, which had a joint venture with Fiat
for cars, engines and transmissions in India, was
also facing heat from top car maker Maruti Suzuki
India Ltd, Hyundai Motor, Renault and Volkswagen

Tata Motors Acquisition of Jaguar Land Rover

SWOT Analysis
Strengths: Weaknesses:
Tatas strong management Jaguars declining sales record
capability Inexperience of handling such
luxury brands
Strong monetary base to invest Tatas
Jaguar Land
Rover
Opportunities: Acquisition
Support from Ford in terms of
Technology, Engine, IT, Threats:
Accounting Market is volatile and driven by
new products
Adding up of luxury brands in
the product line Strong presence of competitors
Access to European Market like Mercedes, BMW, etc.

Tata Motors Acquisition of Jaguar Land Rover

Post Acquisition
Following Cost Rationalisation initiatives were taken to
improve cash flows:

1. Single shifts and down time at all three UK assembly

plants

2. Supplier payment terms extended from 45 to 60 days

in line with industry standard

3. Receivables reduced by 133m from 38 to 27 days

4. Inventory reduced by 217m between June 2008 and

March 2009 from 70 to 50 days

5. Agreement with Unions to implement pay freeze and

longer working hours (equivalent to approximately
20% reduction in Acquisition
Tata Motors labor costs)of Jaguar Land Rover
Post Acquisition Cont
6. Labor actions
- Voluntary retirement to 600 employees
- Agency staff reduced by 800
- Offered leaves to 300 workers of Bromwhich and
Solihull plant
- Additional 450 job cuts including 300 managers

7. Increase in Engineering and capital spending

efficiencies

8. Fixed marketing and selling costs reduced in line with

sales volume

9. ReductionTata
in all other
Motors non-personnel
Acquisition of Jaguar Landrelated
Rover overhead
Share Price Movement

Around 45% dip during May 21, 2008 - July 8, 2008

Tata Motors Acquisition of Jaguar Land Rover
Problems
Drop in share prices
Huge debt burden
Sales volume decreased by 35.2%
Lack of consumer loans
Issue of timing
Operational freedom slows pace of change
Depressed state of the global premium car
market

Tata Motors Acquisition of Jaguar Land Rover

Problems Cont
Jaguar/Land Rover lost 306m ($504m) for
the fiscal year ending March 2009
Tata Motors reported a net loss of Rs.3.29b
($67m) for the quarter to end-June
Tatas core commercial vehicles market in
India is also suffered from slower sales
Extremely high manufacturing costs in Britain
Eliminated more than 2,200 jobs

Tata Motors Acquisition of Jaguar Land Rover

Benefits
This acquisition eases the entry of Tata in European
market which it has been eyeing for long. A previous
JV with Fiat took place, this would further help them
penetrate EU market
Opportunity to spread its business across different
customer segment
At the price staring from Rs.63 lakh and going upto
Rs.93 lakh, it seems Tata has just got the right place
to compete with the current market leaders BMW,
Audi, Mercedes, etc.
Access to large distribution network
Strong R & D culture and facilities
Component sourcing, engineering and design benefits
Tata Motors Acquisition of Jaguar Land Rover
Conclusion
A successful acquisition

Around 345% increase since the acquisition on June 2, 2008

Tata Motors Acquisition of Jaguar Land Rover
THANK YOU