Tata and Ford acquisition


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This presentation will give you an overview of the acquisition held between two major giants, Tata Motors and Ford Motor Company.

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Tata and Ford acquisition

  1. 1. TATA Motors’ Acquisition of Jaguar and Land Rover Presented By:- Santosh Kumar Gupta (65)
  2. 2. ROADMAP OF PRESENTATION ROADMAP Objectives of acquisition Deal is all about Possible outcomes and challenges Strategies conclusion
  3. 3. Objectives of Acquisition • Tata Motors’ objective:- To establish its presence in the high-end premier segment of the global automobile market. • Ford Motor Company’s objective:- To shore up own core business with the help of shutting down unprofitable operations.
  4. 4. DEAL is all about PRICE • $ 2.3 bn for 100% of JLR • Assets Purchased : 3 major UK manufacturing plants 2 advance design centres 26 National Sales Companies (existing and to be carved out of Ford operation), • Debt free on Completion ACQUISITION STRUCTURE • Establishment of Special Purpose Vehicle (SPV) in Singapore and UK.
  5. 5. DEAL is all about (cont….) Sources of Finance • $3bn debt facility in the SPV (guaranteed by TML) plus TML cash resources -Sufficient to meet purchase price and contingencies • Bridge finance for 15 month period • Plans to raise debt at JLR level for on-going working capital requirements Selected other Contractual Terms • Pension Liability • Ford to provide continuity of critical supplies such as engines, access to test facilities, IT, accounting and other services for an agreed period
  6. 6. POSSIBLE OUTCOMES Favorable outcomes :- • To spread its business across different geographies and across different customer segments, • Opportunity to move into the Premium car and SUV segment with access to two world class, iconic brands, • Long term benefits from component sourcing, low cost engineering and design services. • It would reduce the company’s dependence on the Indian market, which accounted for 90% of its sales.
  7. 7. POSSIBLE OUTCOMES Unfavorable outcomes or Challenges :- • Need of huge capital expenditure to revive the fortunes of Jaguar and Land Rover, • No experiences in these segments, • Tough competition with Volkswagen, Daimler, and BMW, • Impact on profitability of Tata Motors in the near future, • Slowing down of the European and US automobile markets.
  8. 8. Strategies • Funding of JLR Acquisition • Tata Motors must need to refinance $3 billion of the JLR acquisition bridge loan by June ’09. • Company have raised $1.1 bn through issue of equity shares. but it still leaves $1.9 bn which needs to be raised via a combination of foreign equity issuance ($500 million), sale of stakes in subsidiaries ($670 million) and raising of working capital facilities at JLR ($700 million). • Funding of future growth requirements Financing support available to Tata Motors’ products going forward: • Tata Motors • TMFL (subsidiary of Tata Motors) • Tata Capital ( financial services company formed by Tata Group also engaged in Vehicle financing )
  9. 9. Strategies to handle key challenges Profitability concerns in rising cost environment:- • Cost reduction efforts Pursue on going cost reduction efforts – vendor rationalization, value engineering etc. • Grow non-vehicle business : Vehicle financing, spare parts, services, accessories, Engineering design services etc
  10. 10. Strategies Impact of JLR acquisition and integration challenges:- • Transitional Support : • Long term arrangements with Ford for supply of engines and other components. • Independence of operation : • JLR’s operations would be autonomous of TML and • it is intended that the existing management of JLR will continue • Pension Deficit : • Pension trustees have agreed to shift the next valuation year.
  11. 11. Strategies Slowing down of the European and US automobile markets:- concentration on these countries • Russia (LR-3RD and Jaguar-8th ) • China (LR-5TH and Jaguar-7th ) • India • The Middle East • South Africa • Thailand introducing new models • which compete other competitor’s models (Jaguar XF)
  12. 12. Conclusion Tata Motors is well poised to emerge as the leading auto- mobile player in the world automotive market in coming years. Combining capabilities and cost advantage to emerge as a world class automotive company Over 100 new About 150% Improve revenue Prudent Increase in Develop Continue products / stability through capital customer expertise to grow variants are geographical investment planned for touch through expansion & policy and the non- points strategic vehicle introduction growing aggressive across India alliance / business in coming 4-5 noncyclical auto cost acquisition years segments reduction Strong brand equity