Tata Motors completes Jaguar Land Rover deal
BS Reporter / Mumbai June 2, 2008, 19:13 IST
The biggest buy-out in the automobile space by an Indian company, Tata Motors, was completed today as it bought the ownership of luxury brands - Jaguar and Land Rover, its manufacturing plants, design centers and worldwide sales network from US car maker Ford Motors Company (FMC).
According to the agreement signed by Tata Motors on March 26, the company will pay cash to the tune of $2.3 billion for the two marquee's, whereas Ford will commit $600 million to pension funds of the two brands.
In a corresponding development, Tata Motors appointed David Smith as the Chief Executive Officer of Jaguar Land Rover (JLR), who was also the acting CEO for the two brands after the demise of Geoff Polites, the last CEO of JLR.
Ratan N Tata, chairman of Tata Sons and Tata Motors was present at the handing over ceremony at the head quarters of Jaguar Land Rover at Gaydon in the UK along with Don Leclair, the executive V-P and chief financial officer of FMC, and Lewis Booth, executive V-P of FMC, who has responsibility for Ford of Europe, Volvo and Jaguar Land Rover.
Tata said, "This is a momentous time for all of us at Tata Motors. Jaguar and Land Rover are two iconic British brands with worldwide growth prospects. We are looking forward to extending our full support to the Jaguar Land Rover team to realise their competitive potential. Jaguar Land Rover will retain their distinctive identities and continue to pursue their respective business plans as before. We recognise the significant improvement in the performance of the two brands and look forward to this trend continuing in the coming years. It is our intention to work closely to support the Jaguar Land Rover team in building the success and preeminence of the two brands."
JLR was acquired on a cash free, debt-free basis. The purchase consideration includes the ownership by Jaguar and Land Rover or perpetual royalty-free licences of all necessary intellectual property rights, manufacturing plants, two advanced design centers in the UK, and worldwide network of National Sales Companies.
Tata Motors also entered into long term agreements with FMC for supply of engines, stampings and other components to JLR. Other areas of transition support from Ford include IT, accounting and access to test facilities. The two companies will continue to cooperate in areas such as design and development through sharing of platforms and joint development of hybrid technologies and powertrain engineering.
The Ford Motor Credit Company, the credit providing arm of FMC, will continue to provide financing for Jaguar Land Rover dealers and customers for a transition period lasting for a period of 12 months. Tata Motors is in an advanced stage of negotiations with leading auto finance providers to support the Jaguar Land Rover business in the UK, Europe and the US, and is expected to select financial services partners shortly.
Tata Motors raised $3 billion (about Rs 12,000 crore) through bridge loans for 15 months from a clutch of banks, including JP Morgan, Citigroup, and State Bank of India.
Last week, company charted out plans to raised Rs 7,200 crore through three simultaneous but unlinked rights issue, the proceeds of which will be used to part-finance the JLR deal of Rs 9,228.75 crore. The precise terms of the issue (the ratio at which these securities will be offered, offer price and the conversion price) will be decided when the issue are ready to be made.
The rights issue will raise the equity capital of Tata Motors by 30-35 per cent by March 2009. The company also plans to raise $500-600 million through an issue of securities in the foreign markets. The company will share the date of listing at a later date.
The acquisition of JLR was done through the company's wholly owned subsidiary TML Holdings (UK).
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