1. Merger and Acquisition Research Report Tata Motors and JLR Case Submitted By: Group 2, EPGDIB VSAT 2011-12 Batch Members Include: 1. Mukesh Dhaniya (Roll No. 36) 2. Pankaj Kotwal (Roll No. 46) 3. Rajiv Kumar (Roll No. 52) 4. Sahil Grover (Roll No. 58) UNDER THE GUIDANCE OF Dr. Sheeba Kapil 2011-12 IIFT, DELHI Academic Research Paper

2. Tata JLR Case Discussion 1 Contents 1 Pre-Merger Due Diligence ...................................................................... 1 1.1 Due Diligence ...............................................................................................1 1.2 Compa ny Profile ...........................................................................................2 1.3 Rationale Behind the Merger ........................................................................3 1.4 Synergies.................. ....................................................................................5 2 Post Merger Strategy .............................................................................. 6 2.1 Post Merger Initiatives ..................................................................................6 3 Financial Due Diligence.......................................................................... 7 3.1 Financial Ascertainment ...............................................................................7 3.2 Bank Consortium Funding the Merger..........................................................7 3.3 Mode of Payment .........................................................................................8 4 Critical Self Assessment ........................................................................ 9 5 Appendix.............................................................................................. .. 10 5.1 Sources ......................................................................................................10 Acade mic Research Paper

3. Tata JLR Case Discussion1 Pre-Merger Due Diligence1.1 Due DiligenceTata Motors stood to gain on several fronts from the deal.• The acquisition would help the company acquire a global footprint and enter the high-end premier segment of the global automobile market• Tata also got

It is Indiaslargest passenger automobile and commercial vehicle manufacturing company and amidsized player on the world market with 0. TataMotors is the largest automobile company in India with gross revenue of Rs. and among the top three inpassenger vehicles with winning products in the compact.81% market share in 2007 according toOICA data.Tata Motors Limited. Tata JLR Case Discussion1. Pantnagar. Tata Motors is a dual-listed company traded onboth the . in early 2008. midsize car and utility vehiclesegments. and one of the worlds largest manufacturers ofcommercial vehicles. the Tata Nano.The company manufactured its first commercial vehicle in 1954 in collaboration withDaimler-Benz AG. as well as the second largest automaker of commercial vehicles. is a multinational corporation headquartered in Mumbai.Established in 1945. and theworld’s second largest bus manufacturer. The OICA ranked it as the worlds 19th largest automaker. Ahmedabad and Pune in India as well asmanufacturing facilities in Argentina. The company is the world’s fourth largest truck manufacturer. Tata Motors is also the second largest bus manufacturer and thefourth largest truck manufacturer in the world. today it isthe leader in commercial vehicles in each segment. Lucknow. part of the Tata Group. India.93billion in 2007-08.500. South Africa and Thailand.two advance design studios and technology as part of the deal – the company gets access to latest technology which would also allow Tata to improve their core products in India. basedon figures for 2007. Tata Motors unveiled the cheapest car inthe world. Page 1  4. when the company began manufacturing locomotives. priced at around US$ 2. Tata Motors has its manufacturing base inJamshedpur.330.2 Company ProfileTATA MOTORSTata Motors.000 people. Part of the Tata Group. which ended in 1969. Indica and Safari suffered from internal noise and vibration problems• This deal provided Tata an instant recognition and credibility across globe which would otherwise would have taken yearsPrivileged & Confidential. one of the largest business conglomerates in Indiawith a presence in over 80 countries and a work force of around 290. for eg. formerly known as TELCO (TATA Engineering and LocomotiveCompany).

Jaguar Cars Ltd. In 2004. England and are manufactured in one of three English Jaguar plants.Privileged & Confidential. in South Korea.Following several subsequent changes of ownership since the 1960s. Page 2  5.Land Rover provides Tata Motors an opportunity to . and the purchase was completed on 2 June 2008. and in2005 it was ranked among the top 10 corporations in India with an annual revenueexceeding INR 320 billion.New York Stock Exchange and the Indian Stock Exchange (where it is acomponent of the Sensex index). Tata Motors was listed on the NYSE in 2004. Tata JLR Case DiscussionJaguar Land RoverJLR was a part of Fords Premier Automotive Group (PAG) and were considered to beBritish icons. which also includes the Rover. Jaguar was listedon the London Stock Exchange and became a constituent of the FTSE 100 Index.Sir William Lyons founded jaguar as the Swallow Sidecar Company in 1922. It also. allowing them to reduce reliance on theIndian market. it bought Daewoos truck manufacturing unit. Halewood near Liverpool and Gaydon in Oxfordshire. Jaguar was involved in the manufacture of high-end luxury cars. acquired a 21%stake in Hispano Carrocera SA. and increases TataMotors product and market diversity. ( better known simply as Jaguar) is an automaker from England. The name waschanged to Jaguar after the second world war due to the unfavourable connotations ofthe SS initials. In March2008. it finalised a deal with Ford Motor Company to acquire their British Jaguar LandRover (JLR) business. originallymaking motorcycle sidecars before switching to passenger cars. JLR also will help Tata Motors expand anddiversify their current international sales market. Jaguar cars are designed in an engineering centre at their headquartersin Coventry. whileLand Rover manufactured high-end SUVs. nowknown as Tata Daewoo Commercial Vehicle.Castle Bromwich in Birmingham.United Kingdom that manufactures luxury and executive motor car. Daimler and Lanchester brandnames. giving it controlling rights in the company.which1.3 Rationale Behind the MergerThe acquisition of Jaguar Land Rover enabled Tata to acquire internationallyrecognized brands with a strong heritage and global presence.

Four Wheel Drive technology andAluminium BIW (Body in White) technology will help Tata further develop andstrengthen their existing engineering capabilities. technolog y andprice positioning and as such. Strengthening of technological and product development/ innovation capabilities to address changing market trends4. Page 3  6.2.The acquisition of Jaguar Land Rover also enables Tata to leverage Jaguar LandRover’s technology and engineering expertise. SUV and crossover offerings.1 Post Merger InitiativesPost Merger. Land Rover’s products in the all-terrain vehiclesegment are complementary to Tata’s products in terms of features. Receivables reduced by £133 million from 38 to 27 . Tata JLR Case Discussion1. several cost rationalization initiatives were taken to improve cash flows:1. Single shifts and down time at all three UK assembly plants. allow them to offer a wide range of vehicles that satisfiesvarious consumer needs. Tata JLR Case Discussion2 Post Merger Strategy2. Additionally. Tata JLR Case DiscussionTo summarize. Sharing of best practices in manufacturing and quality assurance systems and processes5. Jaguar’s premium product offerings will provideTata with immediate entry into the luxury performance car segment. Jaguar Land Rover’stechnological capabilities in petrol engines. some of the reasons behind the merger are as follows:1. Tata alsogain research and development capabilities of Jaguar Land Rover’s strong engineeringworkforce and its two advanced design centers in the UKPrivileged & Confidential. Supplier payment terms extended from 45 to 60 days in line with industry standard.3.broaden their existing portfolio ofUV.4 SynergiesSome of the Synergies that exist are listed in the figures below:Privileged & Confidential. For example. Immediate entry to the luxury performance car and premium all-terrain vehicle segments2. An improvement in the global market position through a combination of resources and strengths3. Page 4  7. Potential operational synergiesPrivileged & Confidential. Through the acquisition. Page 5  8. Enhanced human capital and managerial talent6.

structuring fees. US$ 100 million was paid by TML Holdings PteLimited towards fees and other acquisition expenses consisting of legal and advisoryfees.intellectual property rights (including perpetual royalty free licenses). the Company acquired the global businessesrelating to Jaguar Land Rover including three vehicle manufacturing facilities. As part of the acquisition. and brands andtrade marks. The purchase consideration was basedon an agreed level of working capital as defined in the sale and purchase agreemententered into with Ford. two advanced design centers. Offered leaves to 300 workers of Bromwhich and solihull plant d.4. paid the purchaseconsideration. and other acquisition relatedexpenses. Agreement with Unions to implement pay freeze and longer working hours (equivalent to approximately 20% reduction in labor costs. Fixed marketing and selling costs reduced in line with sales volume9. Inventory reduced by £217m between June 2008 and March 2009 from 70 to 50 days5.300 million on cash free and debt freebasis. Engineering and capital spending efficiencies8. Additional 450 job cuts including 300 managers6. Tata JLR Case Discussion3 Financial Due Diligence3. Jaguar Land Rover Limited.000 million short term bridge loanfacility extended to Jaguar Land Rover Limited. Tata Motors indirect subsidiary. 26 national sales companies. Agency staff reduced by 800 c.The purchase consideration of US$ 2. Reduction in all other non-personnel related overhead costsPrivileged & Confidential.)7.1 Financial AscertainmentOn June 2. paidby Jaguar Land Rover Limited was financed through a capital contribution of US$ 400million and a portion of the proceeds from a US$ 3. Tata Motors completed the acquisition of Jaguar Land Rover fromFord for a purchase consideration of US$ 2.A net cash position of US$ 93 million was estimated for Jaguar Land Rover as at thedate of acquisition. In addition. on cash free and debt free basis. underwriters fees and otherexpenses in relation to the short term bridge loan. due-diligence and related expenses. This amount represents additional net cash over the purchaseconsideration basis and . Labor Actions a.300 million. Page 6  9. 2008. oneveneer production facility. Voluntary retirement to 600 employees b.days.

debt and working capitalposition (as defined in the sale and purchase agreement) of Jaguar Land Rover on thedate of the acquisition. was estimated for Jaguar Land Rover as at the dateof the acquisition.3 Mode of PaymentJaguar Land Rover Limited utilized US$ 1.In addition.Further. Page 7  10. Singapore BranchTML and TML Holdings Pte Limited were also obligors to the aforementioned creditfacility agreement. US$ 700 million from the proceeds from the short term bridge loan was utilizedby Jaguar Land Rover Limited for a short term working capital loan to its subsidiary. and TML provided a guarantee for the facility.2 Bank Consortium Funding the MergerThe US$ 3.3. a final adjustment relating to the actual cash.Land Rover. Singapore Branch• J. Morgan Securities (Asia Pacific) Limited• Mizuho Corporate Bank Limited• Standard Chartered Bank• State Bank of India• BNP Paribas. Tata JLR Case Discussionfacility agreement dated March 13. Citicorp InternationalLimited acted as the Facility Agent. a net cash position of US$ 93 million. representing additional net cash overthe purchase consideration basis..900 million of the aforementioned Short TermBridge Loan towards part payment of the purchase consideration for the acquisition ofJaguar Land Rover from Ford on cash free and debt free basis. Jaguar Land Rover Limited paid this amount additionally out of theproceeds of the short term bridge loan.was paid additionally by Jaguar Land Rover Limited.The balance proceeds from the Short Term .V.P.In addition. The samewas financed out of the proceeds of the short term bridge loan. 2008 with an initial group of arrangers including thefollowing:• Bank of TokyoMitsubishi UFJ Limited• Citigroup Global Markets Asia Limited• ING Bank N.000 million short-term bridge loan facility extended to Jaguar Land RoverLimited in connection with the acquisition of Jaguar Land Rover was pursuant to a creditPrivileged & Confidential. of US$ 131 million is payable byJaguar Land Rover Limited to Ford. This represents additional net working capital/ cashavailable with Jaguar Land Rover over the agreed levels.3. based on a final completion statement of Jaguar Land Roveragreed between Jaguar Land Rover Limited and Ford.

Bridge Loan are intended to be utilized byJaguar Land Rover Limited towards the ongoing operational/ contingency requirementsof Jaguar Land Rover. Times of India2. 2008.the new target markets and retaining the best both production units and talents. Business Today (April 5. China. the company is remolding the future of these two international luxurybrands. 2009)2.com3. to set milestones and long-term goals for the acquired entities – thisstrategy has paid off since sales of Jaguar has picked up and so has the image of TataMotors post the merger and the Nano launch.1 SourcesMAGAZINES:1. hiringfresh talents from around the world is definitely going to make the company gain astrong foothold globally. Mergerdigest. 2008)3. 2009)4. Mergersindia. Page 9  12. The TelegraphWEBSITES:1. 2008)NEWSPAPERS:1. Tatamotors. the Tata Motors advantage for becoming a world classautomotive company:The companies investment plans. Tata JLR Case Discussion5 Appendix5. ICICIdirect. 4p’s (April.Privileged & Confidential.com8. ICMR.com5. new designs with a scope for alternate energy usage. Business & Economy (April. Business world (March 31.One of the major problems for Tata Motors could be the slowing down of the Europeanand US automobile markets. Businessstandard. The sales of Jaguar have picked up in India and Tata Motors has beensuccessful in reinvigorating the luxury car segment in India. Economics Times3. April 20. Wikipedia. India Today (April 18. and the Middle East. the brand JLR has not fallen into the wrong hands. Jaguarlandrover.Tata Motors set-up an integration committee with senior executives from the JLR andTata Motors. We expect that the company would address this issue byconcentrating on countries like Russia.com9.comPrivileged & Confidential.Privileged & Confidential. Deustchbank.com6.com4. Tata JLR Case Discussion4 Critical Self AssessmentAccording to us. looking at TataMotors legacy. India. 2008)5.The figure below shows. Page 10 .com2. Page 8  11.com7.

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