Case Study: Tata Motors Acquisition of Jlr
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CASE STUDY: Tata Motors Acquisition of Jaguar and Land Rover in 2008
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VenkitV
Introduction
India-based Tata Motors Ltd. successfully acquired two British automotive brands – Jaguar and Land Rover (JLR), in June 2008 from Ford Motors for $ 2.3B. As part of the deal, Tata Motors gained 100% stake in companies, 3 UK plants, 2 advanced design and engineering centers, 26 national sales companies, IP rights, $1.1B in capital allowances for taxes, and $600M in pension contributions.
In order to facilitate the deal, Tata Motors raised $3B through bridge loans through a number of banks, including JP Morgan, Citigroup and State Bank of India. Although analysts were skeptical about the deal mainly due to the economic slowdown in the major selling markets, Europe and North America, Tata Motors had accumulated immense cash reserves (D/E ratio of 0.56) to raise the required funds without endangering its own finances.
Ford Motor Company is the third largest automobile producer worldwide and ten times the size of Tata Motors. The company is known for low-priced automobile with standard interchangeable parts, virtual manufacturing, safety focused and low fuel consumption. It acquired JLR into its new group PAG, which comprised of other brands including Aston Martin, Volvo and Lincoln. In September 2006, Allan Mulally cleared the sale of brands within PAG as part of restructuring exercise called “Way Forward” in order to become more competitive. The decision highlighted the fact that Ford had not accomplished its goal of penetrating into luxury brands. Enclosed in the appendix is the timeline of major highlights for JLR and the deal process followed by Tata Motors.
Assess the pros and cons of Tata Motors’ acquisition of Jaguar and Land Rover. How does the acquisition compare to other options the company could have pursued in terms of growth?
Tata Motors main interest
CASE STUDY: Tata Motors Acquisition of Jaguar and Land Rover in 2008
-------------------------------------------------
VenkitV
Introduction
India-based Tata Motors Ltd. successfully acquired two British automotive brands – Jaguar and Land Rover (JLR), in June 2008 from Ford Motors for $ 2.3B. As part of the deal, Tata Motors gained 100% stake in companies, 3 UK plants, 2 advanced design and engineering centers, 26 national sales companies, IP rights, $1.1B in capital allowances for taxes, and $600M in pension contributions.
In order to facilitate the deal, Tata Motors raised $3B through bridge loans through a number of banks, including JP Morgan, Citigroup and State Bank of India. Although analysts were skeptical about the deal mainly due to the economic slowdown in the major selling markets, Europe and North America, Tata Motors had accumulated immense cash reserves (D/E ratio of 0.56) to raise the required funds without endangering its own finances.
Ford Motor Company is the third largest automobile producer worldwide and ten times the size of Tata Motors. The company is known for low-priced automobile with standard interchangeable parts, virtual manufacturing, safety focused and low fuel consumption. It acquired JLR into its new group PAG, which comprised of other brands including Aston Martin, Volvo and Lincoln. In September 2006, Allan Mulally cleared the sale of brands within PAG as part of restructuring exercise called “Way Forward” in order to become more competitive. The decision highlighted the fact that Ford had not accomplished its goal of penetrating into luxury brands. Enclosed in the appendix is the timeline of major highlights for JLR and the deal process followed by Tata Motors.
Assess the pros and cons of Tata Motors’ acquisition of Jaguar and Land Rover. How does the acquisition compare to other options the company could have pursued in terms of growth?
Tata Motors main interest