Friday, March 28, 2008

Tata Motors buys Jaguar, Land Rover from Ford

Tata Motors buys Jaguar, Land Rover from Ford for 2.3 bln usd
March 26, 2008

MUMBAI, Mar. 26, 2008 (Thomson Financial delivered by Newstex) -- Indian automaker Tata Motors Ltd said it has agreed to buy the Jaguar and Land Rover brands from Ford Motor Co (NYSE:F PRS) (NYSE:F PRA) (NYSE:F) for 2.3 bln usd cash.

Tata Motors, which has been negotiating the deal since January, said it would support the growth of the two brands, which employ about 16,000 people at plants in the West Midlands and Merseyside in the UK.

It added the deal will be funded through a bridge finance facility along with the company's existing cash resources.

The company will raise 3 bln usd for a period of 15 months as bridge finance from a small syndicate of banks, which will be refinanced through long-term debt or equity or unlocking value from some of its investments in various units, a company spokesman said.

In a conference call, Tata Motors said Jaguar-Land Rover will operate as subsidiaries under holding company Tata Motors (UK) Holdings Ltd.

'We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact,' Tata Motors chairman Ratan Tata said in a statement.

Under the deal, which is expected to close by the end of next quarter, Ford will continue to supply Jaguar and Land Rover with vehicle components and environmental and platform technologies and will also provide financing for dealers and customers through Ford Motor Credit Co.

The US-based company has also committed to provide engineering support, including research and development, as well as information technology, Tata Motors said.

Ford will also contribute about 600 mln usd to the Jaguar Land Rover pension plans.

Ford said the sale, which was first mooted last August, would allow it to focus on turning around its core Ford brand.

'Jaguar and Land Rover are terrific brands,' said Ford president and CEO Alan Mulally. 'We are confident that they are leaving our fold with the products, plan and team to continue to thrive under Tata's stewardship.'
Ford bought Jaguar for 2.5 bln usd in 1989 and Land Rover for 2.7 bln usd in 2000, and joined them with Aston Martin and Volvo to form its Premier Automotive Group.

But after posting losses of 12.6 bln usd in 2006 and 2.7 bln in 2007, it sold Aston Martin for 479 mln stg last March and put Jaguar and Land Rover on the block in the summer.

Jaguar is thought to have never made a profit for the company -- Ford does not separate results for its brands -- despite investment of about 10 bln usd since it was acquired.

Land Rover, which makes the top-end Range Rover as well as the Discovery and Freelander 4x4 ranges, however, is believed to have made profits of about 1.5 bln usd last year, and the two companies combined are thought to be profitable.

Industry analysts said the price paid was at the top end of expectations, although they said it is difficult to quantify the value of supply and engineering support agreements.

Eric Wallbank, automotive industry leader for Ernst & Young in the UK, said the deal would give Tata access to useful technologies, while Ford would get money to revive its North American operation.

'The deal also removes the uncertainty that has distracted the management, employees and customers of both companies,' he said. 'The companies can move forward with a high degree of certainty.'
Unions in the UK said selling to Tata was the best option for the brands.

'Today's deal is really good news for the UK automotive industry and the thousands of people who work for Land Rover Jaguar and its supply chain,' said Roger Maddison, Unite National Officer for the automotive industry.

'Unite has secured written guarantees for all five UK plants on staffing levels, employee terms and conditions, including pensions, and sourcing agreements,' he added. 'The sale ensures our members' futures and we look forward to working with Tata.'

Piyush Parag, an analyst with Religare Research, said the acquisition is positive for Tata Motors because the company will be able to enter into the luxury automobile segment with these brands.

Prior to this announcement, but amid media reports of the deal being inked today, Tata Motors closed down 0.08 pct at 679.40 rupees on the Bombay (OOTC:BBAO) Stock Exchange while the benchmark index ended 0.81 pct lower at 16,086.83.

Tata Motors is part of the salt-to-software Tata Group.

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