MACR - Tata Jaguar Land Rover

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MACR - Tata Jaguar Land Rover

  1. 1. MERGER & ACQUISITIONS CASE STUDY – TATA & JAGUAR, LAND ROVER PRESENTED TO: MR. P. K. GUPTA LECTURER PRESENTED BY: NIDHI ANN MATHAI 02211403912
  2. 2. TATA MOTORS OVERVIEW  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
  3. 3. JAGUAR OVERVIEW  JLR was a part of Ford's Premier Automotive Group (PAG) and were considered to be British icons.  Jaguar was involved in the manufacture of high-end luxury cars  Jaguar Cars Ltd. ( better known simply as Jaguar) is an automaker from England,  United Kingdom that manufactures luxury and executive motor car.  Sir William Lyons founded jaguar as the Swallow Sidecar Company in 1922, originally making motorcycle sidecars before switching to passenger cars.  The name was changed to Jaguar after the second world war due to the unfavorable connotations of the SS initials.
  4. 4. LAND ROVER OVERVIEW  British car manufacturer founded in 1948 as a marquee of the Rover Company.  Known for superior off-road and road performance  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  Land Rover manufactures high-end SUVs.
  5. 5.  Reports said losses at Jaguar stood at USD 715 million in 2006.  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. FORD’S REASONS FOR THE SALE
  6. 6. RATIONALE FOR ACQUISITION  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  Research and development facilities at a reasonable price.  Help TATA in Component sourcing, design services and low cost engineering.  Corus being the major supplier of automotive steel to JLR and other automobile industries in USA and Europe, acquiring JLR would result in a cost synergy for TATA motors
  7. 7.  To make a global impact as buying these brands at a lower rate now, will give better value later on.  Eases entry in the European market which it has been eyeing for long.  Reduce dependence on the Indian market that accounted for 90% of its sales.  Opportunity to spread business across different customer segments.  To compete with the current market leaders in luxury brands – BMW, Audi, Mercedes.  Access to large distribution network.  JLR had many new models lined up for next 3 years, so no much work just profits.  Strong R & D culture and facilities. TATA’S OBJECTIVES
  8. 8.  12/06/2007- Announcement from Ford to sell Land Rover and Jaguar.  August 2007 - Major bidders identified  Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo Management  India’s Tata Motors and M&M top bidders ($ 2.3b & $ 1.9b)  03/01/2008 – Ford announced Tata’s as the preferred bidders  26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors.  02/06/2008 – The acquisition completed THE DEAL - PROCESS
  9. 9. CAPITAL STRUCTURE  Tata motors raised a bridge loan of US $ 3 billion through syndicate of banks.  Additional amount of US $ 0.7 billion was for engine and component supply, contingencies and working capital.  The amount was repaid in following manner  Rs 1.92 billion Underwriting agreement with JM financial consultants  Rs 1.75 billion was raised through a deposit scheme from the public  Additional subscriptions by promoter companies- Tata sons, Tata capital and Tata Investment Ltd.
  10. 10. In $ million particulars TAMO JLR consolidated net tangible assets 2510 2246 4756 net intangible assets 111 2010 2121 vehicles financing receivables 2935 - 2935 net current assets -57 -107 536 cash 638 - 638 trade investments 233 - 233 pension asstes - 696 696 other assets 3 297 300 total assets 6373 5142 12215 warranty liability and other provisions 489 2667 3156 pension liability - 19 19 deferred tax liability 238 - 238 shareholders equity 2314 2456 2314 capital assets - - 156 minority interest 30 - 30 debt 3302 - 6302 total liability 6373 5142 12215 Balance sheet
  11. 11. TAMO JLR SPV Cons.. sales 10210 14214 - 24424 cost synergies - - - - EBITDA 1196 935 - 2131 EBITDA margin 11.70% 6.60% - 8.70% depreciation 218 699 - 917 interest 140 42 - 182 other income 105 - - 105 PBT 944 194 - 1138 interest cost of acquisition - 225 225 proforma PBT 944 194 -225 913 impact on PBT -3% - - - In $ million P&L A/c
  12. 12.  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.  Following Cost Rationalization 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. POST ACQUISITION
  13. 13.  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.
  14. 14. Proforma Valuations (TAMO +JLR) Share price 630 O/S shares 385 Mkt cap ($m) 6,070 Net Debt ($m) 5,664 This debt includes $3bn raised for acqusisition EV ($m) 11,735 EV ($m) 0.48 The current valuations are inline or discount to global peers EV/EBITDA (1-yr forward) 5.5 P/E (1-yr forward) 6.65 TAMO + JLR: Leverage and Valuation ratios
  15. 15. WHAT HAPPENED NEXT? 16 SALESPROFITS
  16. 16. SHARE PRICE MOVEMENT
  17. 17. PROBLEMS  Drop in share prices  Failure of rights issue  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  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  Extremely high manufacturing costs in Britain  Eliminated more than 2,200 jobs
  18. 18. CURRENT STATUS  Jaguar land rover sales continued their upward trend since launch in June 2009.  During the quarter ended June 2010 JLR generated a profit of Rs 1613 crore. Tata motors had never ventured into luxury car segment before acquiring JLR, hence the inefficiency in handling such segment hampered Tata motors’ operational efficiency for quite some time.  Jaguar Land Rover is now a strong, profitable and innovative competitor in the premium car industry.  26% Delivery Growth.  JAGUAR LANDROVER global sales in July 2010 were 19,386 vehicles, higher by 30%. Jaguar sales for the month were 5,676, higher by 26%, while Land Rover sales were 13,710, higher by 31%.  Recently TATA MOTORS drove past Reliance Industries to top the 2010edition of India’s Most Valuable Brands survey with a valuation of $8.45billion. A major part of this success can be attributed to the JAGUAR AND LANDROVER.

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