Tata Motors & JLR Merger


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Tata Motors in the year 2008 acquired two of the most recognized premium segment car brand - Jaguar & Land Rover for a price tag of $2.5 billion. This presentation tells you about the history of Tata Motors, Jaguar and Land Rover, details of the deal, key motives of the merger, challenges in the merger, and both the companies current stage.

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Tata Motors & JLR Merger

  1. 1. Merger with and 1
  2. 2. Presented By: • • • • • Vishal Gunjalkar Mangesh Dongade Chetan Kadam Pratik Gupta Rohit Dhoundiyal 2
  3. 3. Preface of the Merger  On June 2008, TATA Motors acquired Jaguar & Land Rover(JLR)  Deal was worth US$ 2.3 billion  Acquire global footprint and entry in high-end premium segment of automobile industry  World’s cheapest car as well as luxury brands  Investment was poorly timed and questions were raised on strategies  Demand in the global market for luxury cars collapsed 3
  4. 4. TATA Motors  Multinational automotive manufacturing company founded in the year 1945 by visionary businessman Mr. J.R.D Tata  8th largest motor vehicles manufacturing company, 4 th largest truck manufacturer, 2nd largest bus manufacturer by volume  Products:  Cars  Trucks  Vans  Buses  Military vehicles  Coaches  1st Indian engineering company in India to be listed in NYSE  As of 2012 – Profit of US$ 2.28 billion and total assets of US$ 28.05 billion 4
  5. 5. Jaguar Land Rover  Jaguar cars was founded in the year 1922 by Mr. William Walmsley & Mr. William Lyons as “Swallow Sidecar Company”  Land Rover was founded in the year 1978  Ford Motors acquired Jaguar 1989 for US$ 2.5 billion and Land Rover in 2000 for US$ 2.75 billion  Both the company are manufacturers of luxury cars/premium segment cars & SUV  As of 2013 – Profit of £ 1.215 billion 5
  6. 6. British brand under Ford  Ford is a leading automaker & 5th largest automobile company founded in the year 1903  Ford established Premier Automotive Group(PAG) in the year 1999 which consisted of Jaguar, Ashton Martin, Lincoln and later Land Rover  Reasons for selling JLR:  Unprofitable Venture  Unstable market & economic condition  High cost of labour  Other brands sold by Ford:  Ashton Martin  Volvo 6
  7. 7. Ford sells JLR  September 2006, Mr. Allan Mulally assumed charge of president & CEO of Ford  Decided to dismantle PAG(Premier Automotive Group)  In June 2007, Ford announced to sell JLR 7
  8. 8. The Deal  On 12th June 2007, Ford announced its plan to sell Land Rover & Jaguar  Likely buyers for JLR were:  TATA Motors  Mahindra & Mahindra  Cereberus Capital Management  TPG Capital  TATA wins the bid for acquiring JLR  The price paid by Tata was approximately half of what Ford paid to buy Jaguar and Land Rover  The deal took over a year to agree - which may have helped with the post-merger integration. Tata recognised that it would continue to need support from Ford who is a main supplier of car components to the two brands 8
  9. 9. The Deal  No significant change proposed to the businesses by Tata. They claimed that staff, trade unions and the UK government had been kept informed about the proposed takeover and supported the move  The deal has been endorsed by trade unions, which secured a commitment from Tata to continue with JLR’s production plans until the end of 2011. This includes development of new models  Contd... TATA charted out plans to raise Rs. 4200 crore via rights issue and around US$ 600 million through Global Depository Receipt (GDR) 9
  10. 10. Key motives of the merger - TATA Motors  Acquiring JLR would provide significant potential for revenue synergies, including giving Tata greater international distribution, broader product range and better customer service skills  Tata gains access to world-class engineering capability  Strengthens relationship between Tata’s steel and motoring businesses 10
  11. 11. Key motives of the merger - JLR  JLR suffering from huge loss  TATA Corus was a leader in automotive grade steel in the European Market  TCS provides services like engineering designs, manufacturing solution and consultancy services to automotive manufacturer like Chrysler, Ford and General Motors 11
  12. 12. Challenges in the merger  Complexity in raising fund  Global financial crisis had severely affected the global automobile industry especially in luxury car segment  Increasing material and fuel prices had slowed down demand of vehicles  TATA was planning to invest another US$ 1 billion in JLR. Huge capital incurred on development of Nano and on joint venture with Fiat  Morgan Stanley reported that JLR acquisition will lead to earning volatility of TATA 12
  13. 13. What Happened Next?  Successful or Unsuccessful?  Market capitalization  Mcap plunged to Rs. 6500 crore from Rs. 24000 crore  But today Mcap is Rs. 1 lakh crore  Brand Value  Valuation of US$ 7370 million  Top 50 India’s most valuable brand 13
  14. 14. What Happened Next?  Contd.... Profit 14
  15. 15. What Happened Next?  Contd.... Sales of Jaguar Land Rover 15
  16. 16. Conclusion 16
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