TATA-JLR Deal

Group Members• Ketan Jadhav-07• Sneha Joshi- 10• Mahesh Korvi-13• Rajesh Umbarkar-20• Vihang Varwate- 21

PANEL DISCUSSION ON

TATA -JAGUAR -LAND ROVER DEAL

What is Merger

&

Acquisition?

Merger and Acquisition• Mergers and acquisitions (abbreviated M&A) refers to

the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity.

M&A Activities in India:

• In 2007, there were a total of 676 M&A deals• Tata steel buys Corus Plc : 12.1$ billion • Hindalco acquired novelis: 6$ billion • Tata buy jaguar and land rover : 2.3$ billion • Essar steel buys Algoma Steel: 1.58$ billion • Vodafone buys hutch : 11$ billion • In year 2008.. M&A deals in India in 2008 totaled worth USD 19.8 bn Less compared to last year which stood at 33.1 bn $. Decline of M&A activity was in line with the global activity.

JLR-One more step towards a Global Footprint

ABOUT TATA MOTORS

TATA MOTORS – A SNAPSHOT

• TATA GROUP is 150 year old, Previously Tata Engineering and Locomotive Company, Telco.

• India's largest 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.

Subsidiaries- • JAGUAR CARS• LAND ROVER• TATA DAEWOO COMMERCIAL

• 1922 - Founded in Blackpool as Swallow Sidecar company • Jaguar made its name by producing a series of eyecatching sports

car such as XK120 of 1941, E type of 1961• 1975 - Nationalized in due to financial difficulties • 1984 - Floated off as a separate co in the stock market • 1990 - Taken over by Ford , Ford acquired Jaguar for $2.5 billion

• 1999- it became part of fords new premier automotive group along with Aston Martin, Volvo cars

• A statement of ultra luxury, Holds Royal warrants, Rarely advertised, Ford’s formula one entry since 1990s

JAGUAR– The ups and downs

• British car manufacturer founded in 1948 as a marquee of

the Rover Company.

• Known for superior off-road and road performance

• 1967 – become part of LMC

• 1976 – 1 million cars running on the road

• In 1994 Rover Group is taken over by BMW

• sold to FORD MOTORS for $ 2.75 b in 2000.

• Used by military for projects and expeditions, Safe but less

reliable, Makeover in recent times

• Expanding worldwide…….

LAND ROVER

• Reports said losses at Jaguar stood at USD 715 million in 2006.

• Bringing down production costs and turning around the company successfully will be the challenge-Its a test that Ford failed.

• The 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 is combining both the brands

Why is Ford Selling?

• 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 ($ 2.3b

& $ 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 PROCESS

Why TATA buying?

• 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.

• Reduce the company dependence on the Indian market which accounted for 90% of its sales

• Opportunity to spread its business across different customer segment

Why TATA buying?

• At the price staring from 63 lakh and going upto 93 lakh, it At the price staring from 63 lakh and going upto 93 lakh, it seems Tata has just got the right place to compete with the seems Tata has just got the right place to compete with the current market leaders in luxury brands – BMW, Audi, current market leaders in luxury brands – BMW, Audi, MercedesMercedes

• Publicity on an international scalePublicity on an international scale• Access to large distribution networkAccess to large distribution network• JLR had many new models lined up for next 3 years, so no JLR had many new models lined up for next 3 years, so no

much work just profitsmuch work just profits• Strong R & D culture and facilitiesStrong R & D culture and facilities

THE DEAL

SWOT

THE DEAL

100% stake in Jaguar & land Rover Business

TAMO has acquired the business & initially they will be operated independently of the partner.

3 Plants in UK These are well invested plants

2 advanced design & engineering center

4-5000 engineers engaged in testing ,prototype design & powertrainEngineering , development & integration

26 National sales company

Both existing national sales companies of jaguar/land rover & also those that are carved out of current Ford operation

Intellectual property rights

This covers all key technologies to be transferred to JLR & perpetual royalty free license on technologies shared with Ford

Capital Allowance A minimum guaranteed amount of $1.1 bn which will help managing in Tax going forward

Support from Ford Motor Credit

Ford Motor Credit will continue to support the sales of JLR for around next 12 months

Pension Contributed by Ford

Ford will contribute $ 600 mn of the Pension Fund

• The profits for the first quarter for the year 2008-09 were at 3.26 billion

• Q3 the sales of passenger vehicles went down to 41,287 units a drop of 14.14%

• Tata Motors cut production across different categories.

Problems in the Domestic Market

Tata Motors’ Financial Performance

Q3FY09 Q3FY08 9MFY09 9M FY 08

Revenue 47,586.2 72,518.3 187,659.2 199,813.0

EBITDA 916.5 8,197.4 11,186.3 21,608.6

Profit before Tax (4191.5) 6651.0 2839.5 18,784.2

Net Profit (2632.6) 4990.5 4098.4 14,926.5

(In Rs. Million)

Total Commercial Vehicles 49,546 82,5568 195,192 215,313

Total Passenger Vehicles 42,187 49,284 142,507 153,475

Exports 7,027 12,756 29,177 40,488

Total Volumes 98,760 144,608 366,876 409,276

Volume Summary

Post merger

• 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 £133 million from 38 to 27 days.

4] Inventory reduced by £217m between June 2008 and March 2009 from 70 to 50 days .

Contd..5] 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.

6] Agreement with Unions to implement pay freeze and longer working hours

(equivalent to approximately 20% reduction in labor costs.)

7] Engineering and capital spending efficiencies.

8] Fixed marketing and selling costs reduced in line with sales volume.

9] Reduction in all other non-personnel related overhead costs.

Recommendations

Partnering

• Keep acquisition structurally separate• Maintain it’s identity• Share operational Know-how

Current Status

• Successful Financial Year• Record Revenues & earnings• Net Income growth• Volume growth

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.

• 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

Thank You