tata motors cross border acquisition of jaguar
TRANSCRIPT
INTRODUCTION India based TataMotors acquired the ownership of
luxury brands - Jaguar and Land Rover on June2, 2008
The deal included the purchase of JLR'smanufacturing plants, two advanced design centers inthe UK, national sales companies spanning across theworld and also licenses of all necessary intellectualproperty rights.
THE DEAL PROCESS 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, ApolloManagement India’s
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 Roveroperations to Tata Motors.(2.3b)
02/06/2008– The acquisition was complete
MOTIVES OF TAKEOVER Provide significant potential for revenue synergy
including giving TATA greater international distribution broader product range and better customer service skills
Tata gains access to world class engineering capability
Strengthens relationship b/w Tata steel and motoring business
POST MERGER IMPACTSFollowing 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.)
Depressed state of the global premium car market
Jaguar/Land Rover lost 306 million pounds ($504 million)
for the fiscal year ending March 2009
Tata Motors reported a net loss of Rs3.29bn ($67 million)
for the quarter to end-June
Tata’s core commercial vehicles market in India is also
suffering from slower sales
Extremely high manufacturing costs in BritainEliminated
more than 2,200 jobs
Benefits Tata wanted to make a global impact and it thinks that
buying these brands at a lower rate now, will givebetter value later on.
This acquisition also eases the entry of Tata inEuropean market which it has been eyeing for long.
Reduce the company dependence on the Indianmarket which accounted for 90% of its sales
Increase sales in emerging markets.
Reduce dependence on mature markets
Opportunity to spread its business across differentcustomer segment
At the price staring from 63 lakh and going upto 93lakh, it seems Tata has just got the right place tocompete with the current market leaders –BMW, Audi, Mercedes
Publicity on an international scale
Access to large distribution network
JLR had many new models lined up for next 3years, so no much work just profits
Strong R & D culture and facilities
Component sourcing, engineering and design benefits
CONCLUSION The merger seemed poorly timed
Demand for luxury cars collapsed as a result of financial
crisis
Refinancing from CITI group and JP MORGAN
Started making profits in 2010 upto 41 %
Now an example of a successful merger
Entered CHINA in march 2012 with a joint venture with
Chery automobiles