By: Babita Sharma: 08(SR) Bansi Pandya:11(IT) Shreeti Daddha: 09(SR)

Mergers is a fusion between two or more enterprises where the identity of one or more is lost and the result is a single enterprise. Acquisition, also known as takeover is the buying of one company by another.

TATA GROUP is 150 year old, previously Tata Engineering and Locomotive Company, Telco. Indias largest passenger automobile and commercial vehicle. Tata Motors was established in 1945 Listed on the New York Stock Exchange in 2004.

Jaguar and Landrover(informally JLR) is a british automotive company. Jaguar in 1975 - Nationalized in due to financial difficulties 1990 - Taken over by Ford Founded in 1948 as a marquee of the Rover Company. Known for superior off-road performance, Used by military for projects and expeditions, Safe but less reliable, Makeover in recent times In 1994 Rover Group is taken over by BMW & sold to FORD MOTORS for 2.75 bn$ in 2000

Ford acquired Jaguar for $2.5 billion in 1989. Ford acquired Land Rover for $2.75 billion in 2000. But the US auto major put the two marquees on the market in 2007 after posting losses of $12.6 billion in 2006 - the heaviest in its 103year history.

Reports said losses at Jaguar stood at USD 715 million in 2006. The Land Rovers profit, on the other hand, was driven by the record sale of 2.26 lakh vehicles, an 18% growth in 2007. Bringing down production costs and turning around the company successfully will be the challenge-Its a test that Ford failed. Ford is combining both the brands

12/06/2007- 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) 03/01/2008 Ford announces Tata as the preferred bidders 26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors.(2.3b) 02/06/2008 The acquisition was complete

Long term strategic commitment to automotive sector Opportunity to participate in two fast growing auto segement Increased business diversity across market and product Jaguar offer a range of performance/luxury vehicles Benefits from component sourcing, design services and low cost engineering. Land Rover provides a natural fit for TMLs suv segment.

WHAT IS TATA PAYING FOR ????

100% stake in Jaguar & land Rover Business Three plants in UK Two advanced design & engineering center Twenty six National sales company Intellectual property rights Tata Motors has acquired the business & initially they will be operated independently of the partner. Tata Motors will directly own these two well invested plants by Ford. 4000-5000 engineers engaged in testing, prototype design & power train engineering, development & integration. Both existing national sales companies of JLR and also those that are carved out of current Ford operation would be owned by Tata Motors. These covers all key technologies to be transferred to JLR & perpetual royalty free license on technologies shared with Ford. Capital Allowance Capital allowance with a minimum guaranteed amount of US $1.1 billion to be carried forward for future tax savings. Support from Ford Motor Credit Ford Motor Credit will continue to support the sales of JLR for the next 12 months Pension Contributed by Ford Ford will contribute US$ 600 million of the Pension Fund to the workers in United

Technological advances

Diversification of markets
Synergy with Other Group Firms Completing the Product Portfolio

Transfer of Technology

The transfer of technology eventually helps the companys products compete in the local and global markets.

Technology gets used in Tata Motors

Tata gains the following 1. Improved manufacturing across different product lines

2. Increased competitiveness in design and manufacturing

Scenario if Land Rover and Jaguar is not Acquired

Company Saves money in the Short Run This contributes to the failure in diversification Tata Motors bears undiversified economic risk

Failure of the Thrust for Market Diversification

Scenario if Land Rover and Jaguar is gets acquired

Company experiences Short term Cash Outflow and increased debt Company is able to use Jaguar and Land Rover to enter North American Market Tata Motors risk gets diversified . International market Knowledge Acquired

Success of the Companys Thrust for Market Diversification

Tata Steel
Contribution to Economies of Scale More competitive spare parts costing, expertise in durability, more efficient operations

Lower cost of Steel (primary component for vehicle production)

Tata Motors

Jaguar and Land Rover

Global Network, Technology, Aesthetic designs for diversified markets Mutual Brand Image Effects through association

Reinforced credentials by association with top hotels.

Tata Hotels

Tata Motors is Currently in passenger cars, light trucks,medium and heavy trucks as well as buses. For the passenger car segment, Tata Motors serves the low income to middle income market
It does not have an existing luxury brand to compete with foreign counterparts such as Lexus, BMW, Mercedes Benz etc.

Tata wanted to make a global impact and it thinks that buying these brands at a lower rate now, will give better value later on.
This acquisition also eases the entry of Tata in European market which it has been eyeing for long. A previous JV with FIAT took place, this will further help them penetrate EU market.

Increase sales in emerging markets Reduce dependence on mature markets Opportunity to spread its business across different customer segment Reduce the company dependence on the Indian market which accounted for 90% of its sales

Tata Motors stood to gain on several fronts from the deal.

The acquisition would help the company acquire a global footprint and enter the high-end premier segment of the global automobile market Tata also got two advance design studios and technology as part of the deal the company gets access to latest technology which would also allow Tata to improve their core products in India, for eg, Indica and Safari suffered from internal noise and vibration problems

This deal provided Tata an instant recognition and credibility across globe which would otherwise would have taken years Privileged & Confidential.

Following Cost Rationalisation initiatives were taken to improve cash flows: 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. Receivables reduced by 133 million from 38 to 27 days. 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 Bromwhich and solihull plant. Additional 450 job cuts including 300 managers. Agreement with Unions to implement pay freeze and longer working hours (equivalent to approximately 20% reduction in labor costs.) Engineering and capital spending efficiencies. Fixed marketing and selling costs reduced in line with sales volume. Reduction in all other non-personnel related overhead costs.

Cumulative losses for many years

Goodtime to get hold of two unique brands for Tata Motors Unavailability of other options

Global Footprint Long term economies of scale Broaden the brand portfolio Long term commitment to automobile sector Recognition to own the cheapest car as well as most luxurious cars Cost competitive advantage

Financing the deal

Investor disagreement
Unfavourable economic conditions especially in the target market

Debt burden

Fall in share price

Inexperience in handling luxury brands Strong competition

The biggest buyout in automobile space by an automobile company, Tata Motors was completed on june 3, 2008 as it bought the ownership of luxury brands, JAGUAR and LANDROVER for $2.3 billion on a cash free debt free basis THE LEVERAGE BUYOUT SCENE

Tata motors raised $3 billion , about Rs. 12000 crore through bridge loans of fifteen months from a clutch of banks including JP MORGAN, CITIGROUP, and STATE BANK OF INDIA Company charted out plans to raise rs. 7200 crore via rights issue, proceeds of which were to be used to part finance the JLR deal of rs.9228.75 crore The rights issue raised the equity capital of TATA MOTORS by 3035% by march 2009

Successful

Record Revenues & earnings

Net Income growth Volume growth

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. 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

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