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March 27, 2008 |
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TATA MOTORS: To Buy Jaguar and Land Rover for US$2.3 Billion Tata Motors Ltd. has signed a definitive agreement with Ford Motor Co. for the acquisition of the Jaguar and Land Rover units for US$2.3 billion. The parties announced their entry into the agreement yesterday, which deal comprises the purchase of the two units' brands, plants and Intellectual Property Rights. According to media releases, Tata Motors will pay approximately US$2.3 billion to Ford Motor in cash upon closing of the transaction. At closing, Ford will then contribute up to approximately US$600 million to the Jaguar Land Rover pension plans. The transfer of ownership to Tata Motors is expected to close by the end of the next quarter, subject to applicable regulatory approvals. "These are vanity products and probably these brands will have a tough time in a weak economy," Edwin Merner, President of Atlantis Investment Research Corp. in Tokyo told Bloomberg News. Mumbai-based Tata Motors "will have trouble doing well in this sort of environment," he said. Sales for the two luxury brands have dropped as the global markets are experiencing a slowdown. Jaguar sales in January and Februray were 33% lower in the United States and Europe. Land Rover sales for the first two months dropped 7.7% in Europe and 13% in the U.S. "Turning around Jaguar will be a major challenge," Ashvin Chotai, a London-based independent Asian automobile analyst, told Bloomberg. "Tata will need to tread carefully and ensure there is no negative impact on these brands." Tata Motors' Statement Commenting on the agreement, Chairman of Tata Sons and Tata Motors, Ratan N. Tata, said, "We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business. We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact. We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business." Tata Motors points out that Jaguar Land Rover's employees, trades unions and the U.K. Government have been kept informed of developments as the sale process progressed and have indicated their support for the agreement. Ford Motor's Statement Ford said the transaction is the culmination of its decision last August to explore strategic options for the Jaguar Land Rover business, as the company accelerates its focus on its core Ford brand and “One Ford” global transformation. "Jaguar and Land Rover are terrific brands," said Alan Mulally, president and CEO, Ford Motor Company. "We are confident that they are leaving our fold with the products, plan and team to continue to thrive under Tata’s stewardship. Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Company that delivers profitable growth for all." "This is a good agreement. It provides the Jaguar Land Rover management team and employees with the assurances needed to maintain their focus on delivering the best results for the business," said Lewis Booth, executive vice president, Ford Motor Company, who has responsibility for Ford of Europe, Volvo and Jaguar Land Rover. "I am confident that, under its new owner, Jaguar Land Rover will continue to build upon the significant improvements and product successes it has achieved in recent years." Speaking on behalf of Jaguar Land Rover, Geoff Polites, chief executive officer, said: "Jaguar Land Rover’s management team is very pleased that Ford and Tata Motors have come to an agreement [yesterday]. Our team has been consulted extensively on the deal content and feels confident that it provides for the business needs of both our brands going forward. "We have also had the opportunity to meet senior executives from Tata Motors and the Tata group," Polites continued. "They have expressed confidence in the team that has delivered significant improvements in Jaguar Land Rover’s business performance. We feel confident that we can forge a strong working relationship with our new parent company, and we look forward to a bright and successful future for Jaguar Land Rover." Additional Tata-Ford Deals As part of the transaction, Ford will continue to supply Jaguar Land Rover for differing periods with powertrains, stampings and other vehicle components, in addition to a variety of technologies. Ford also has committed to provide engineering support, including research and development, plus information technology, accounting and other services. In addition, Ford Motor Credit Company will provide financing for Jaguar and Land Rover dealers and customers during a transitional period, which can vary by market, of up to 12 months. The parties believe these arrangements will support Jaguar Land Rover's current product plans, while providing Jaguar Land Rover with the freedom to develop its own standalone capabilities in the future that will best serve its premium manufacturer requirements. About Jaguar and Land Rover Founded in 1922, Jaguar has been amongst the premium brands for luxury saloons and sports cars. Since its very first design appeared in 1948, Land Rover has always been universally identified as the ultimate in four-wheel drive vehicles. Jaguar and Land Rover have been under Ford’s ownership since 1989 and 2000 respectively. The two together have about 16,000 employees. About Tata Motors India's largest automobile company, Tata Motors Limited -- http://www.tatamotors.com/ -- is mainly engaged in the business of automobile products consisting of all types of commercial and passenger vehicles, including financing of the vehicles sold by the Company. The Company's operating segments consists of Automotive and Others. In addition to its automotive products, it offers construction equipment, engineering solutions and software operations. Tata Motors has operations in Russia and the United Kingdom. * * * Standard & Poor's Ratings Services, on July 13, 2007, assigned its 'BB+' issue rating to the proposed US$490 million zero- coupon convertible bonds of India's Tata Motors Ltd. (BB+/Stable/--). The bonds represent a direct, unsecured and unsubordinated obligation of the company. Proceeds from the bonds will be used for capital expenditure, overseas investments, acquisitions, and other general corporate purposes. Moody's Investors Service, on July 26, 2005, gave Tata Motors 'Ba1' long-term corporate family and senior unsecured debt ratings. |
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