Yaroslav Rozhankivskyy: Три складові і три передумови максимальної продуктивн...
Tata and Ford acquisition
1. TATA Motors’
Acquisition of
Jaguar and Land Rover
Presented By:-
Santosh Kumar Gupta (65)
2.
3. ROADMAP OF PRESENTATION
ROADMAP
Objectives of acquisition
Deal is all about
Possible outcomes and challenges
Strategies
conclusion
4. 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.
5. 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.
6. 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
7. 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.
8. 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.
9. 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 )
10. 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
11. 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.
12. 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)
13. 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