Tata Groups Top M&A Deals

Acquirer

Target

Sector

Tata
Chemicals
Limited

General
Chemicals
Industrial
Products
Inc.

TATA
Motors
TATA
Steel ltd
TATA
Power
NTTDocomo

Stake
(%)

Price (US$
million)

Date

Plastic and 100

Chemicals

1005

27-03-2008

Jaguar
Land
Rover

Automobile

100%

2,300.00

27-03-08

Corus
steel
PT-Kaltim
Prima Coal
TataTeleservic
es ltd.

Steel

100%

12201

30-03-07

1100

30-03-07

2700

13-11-08

Coal
& 30%
mines
Tele26%
Communicat
ions

9.2 TATA MOTOR - JLR

About the acquisition
Date: - 27th March 2008
Acquirer: - Tata Motors Ltd
Target company: - Jaguar Land Rover
Stake: - 100 %
Deal amount: - US$ 2300m
Sector: - Automotive
TATA MOTORS

Tata Motors Limited is India's largest automobile company, with

consolidated revenues of Rs.70,938.85 crores (USD 14 billion) in
2008-09

It is the leader in commercial vehicles segment, and among the top

three in passenger vehicles

It is the world's fourth largest truck manufacturer, and the world's

second largest bus manufacturer

The company's 24,000 employees are guided by the vision to be

"best in the manner in which we operate, best in the products we
deliver, and best in our value system and ethics"

Over 4 million Tata vehicles ply on Indian roads, since the first
rolled out in 1954

It has manufacturing base in India spread across Jamshedpur

(Jharkhand),

Pune

(Maharashtra),

Lucknow

(Uttar

Pradesh),

Pantnagar (Uttarakhand) and Dharwad (Karnataka)

The company's dealership, sales, services and spare parts network

comprises over 3500 touch points

Tata Motors also distributes and markets Fiat branded cars in India

Tata Motors, the first company from India's engineering sector to be

listed in the New York Stock Exchange (September 2004), has also
emerged as an international automobile company

It has operations in the UK, South Korea, Thailand and Spain

In 2004, it acquired the Daewoo Commercial Vehicles Company,

South Korea's second largest truck maker

In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a

reputed Spanish bus and coach manufacturer, and subsequently the
remaining stake in 2009. Hispano's presence is being expanded in
other markets

In 2006, Tata Motors formed a joint venture with the Brazil-based

Marcopolo, a global leader in body-building for buses and coaches to
manufacture fully-built buses and coaches for India and select
international markets

Tata Motors is also expanding its international footprint, established

through exports since 1961

The company's commercial and passenger vehicles are already

being marketed in several countries in Europe, Africa, the Middle
East, South East Asia, South Asia and South America

In January 2008, Tata Motors unveiled its People's Car, the Tata
Nano, which India and the world have been looking forward to

JAGUAR LAND ROVER

Jaguar Cars Ltd, founded in 1922, is one of the worlds premier

manufacturers of luxury saloons and sports cars

Since 1948 Land Rover has been manufacturing authentic 4*4s that
defines breadth of capability in their segments

The Jaguar Land Rover business employs some 16000 people,

predominately in the UK, including some 3500 engineers at two
product development centres in Whitley, Coventry and Gaydon,
Warwickshire

The business is a major wealth generator for the UK Jaguars

exported to 63 countries, with sales to customers conducted
principally through franchised dealers and importers

That Jaguar and Land Rover are two of the most well-known
automotive names in the world, and that Ford had acquired them
for a collective cost of about $5 billion almost a decade earlier, Tata
Motors seems to have got them at a steal at $2 billion

Terms
Under the terms of the deal Ford will contribute about $600 m to JLR
pension plan. Ford will continue to supply JLR for differing periods with
engines, stamping and other car components, in addition to a variety of
technologies. In addition Ford Motor Credit Company will provide
financing for JLR and customers during a transitional period upto 12
months.

Detailed Case Study

Acquisition of British Icons
On June 02, 2008, India-based Tata Motors completed the acquisition of
the Jaguar and Land Rover (JLR) units from the US-based auto
manufacturer Ford Motor Company (Ford) for US$ 2.3 billion, on a cash
free-debt free basis.
JLR was a part of Ford's Premier Automotive Group (PAG) and were
considered to be British icons. Jaguar was involved in the manufacture of
high-end luxury cars, while Land Rover manufactured high-end SUVs.
Tata Motors had several major international acquisitions to its credit. It
had acquired Tetley, South Korea-based Daewoo's commercial vehicle
unit, and Anglo-Dutch Steel maker Corus.
Tata Motors long-term strategy included consolidating its position in the
domestic Indian market and expanding its international footprint by
leveraging on in-house capabilities and products and also through
acquisitions and strategic collaborations.
Analysts were of the view that the acquisition of JLR, which had a global
presence and a repertoire of well established brands, would help Tata
Motors become one of the major players in the global automobile
industry.
Ford Motors Company (Ford) is a leading automaker and the third largest
multinational corporation in the automobile industry. The company
acquired Jaguar from British Leyland Limited in 1989 for US$ 2.5b.
After Ford acquired Jaguar, adverse economic conditions worldwide in the
1990s led to tough market conditions and a decrease in the demand for
luxury cars. The sales of Jaguar in many markets declined, but in some
markets like Japan, Germany, and Italy, it still recorded high sales.

In March 1999, Ford established the PAG with Aston Martin, Jaguar, and
Lincoln. During the year, Volvo was acquired for US$ 6.45 billion, and it
also became a part of the PAG In September 2006, after Allan Mulally
(Mulally) assumed charge as the President and CEO of Ford, he decided to
dismantle the PAG. In March 2007, Ford sold the Aston Martin sports car
unit for US$ 931 million.
In June 2007, Ford announced that it was considering selling JLR.
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 power train 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.
Financing the deal
On March 26 2008, Tata Motors entered into an agreement with Ford for
the purchase of JLR. Tata Motors agreed to pay US$ 2.3 billion in cash for
a 100% acquisition of the business of JLR. As part of the acquisition, Tata
Motors did not inherit any of the debt liabilties of JLR the acquisition was
totally debt free.
Tata Motors raised $3 billion (about Rs. 12000 crore) through bridge loans
for 15 months from a clutch of banks, including JP Morgan, Citigroup, and
SBI

The Company chartered out plans to raised Rs,7200 crore through three
simultaneous but unlinked rights issue, the proceeds of which will be used
to part-finance the JLR deal of Rs.9228.75 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
percent by March 2009. The company also plans to raise $500-600 million
through an issue of securities in the foreign markets. The company will
share the date of listing at a later date.
The acquisition of JLR was done through the companys wholly owned
subsidiary TML Holdings (UK).
The Challenges
Morgan Stanley reported that JLR's acquisition appeared negative for Tata
Motors, as it had increased the earnings volatility, given the difficult
economic conditions in the key markets of JLR including the US and
Europe. Moreover, Tata Motors had to incur a huge capital expenditure as
it planned to invest another US$ 1 billion in JLR. This was in addition to
the US$ 2.3 billion it had spent on the acquisition. Tata Motors had also
incurred huge capital expenditure on the development and launch of the
small car Nano and on a joint venture with Fiat to manufacture some of
the company's vehicles in India and Thailand. This, coupled with the
downturn in the global automobile industry, was expected to impact the
profitability of the company in the near future
The Road Ahead
Tata Motors had formed an integration committee with senior executives
from the JLR and Tata Motors, to set milestones and long-term goals for
the acquired entities. One of the major problems for Tata Motors could be
the slowing down of the European and US automobile markets. It was
expected that the company would address this issue by concentrating on
countries like Russia, China, India, and the Middle East.

IMPACT ON SHAREHOLDERS WEALTH

Pre Acquisition
Date
22-Feb-08
25-Feb-08
26-Feb-08
27-Feb-08
28-Feb-08
29-Feb-08
3-Mar-08
4-Mar-08
5-Mar-08
7-Mar-08
10-Mar-08
11-Mar-08
12-Mar-08
13-Mar-08
14-Mar-08
17-Mar-08
18-Mar-08
19-Mar-08
24-Mar-08
25-Mar-08
28-Mar-08

Post Acquisition

Open Price
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

Date

####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####

####
####
####
####
####

####

Pre Acquisition
Date
22-Feb-08
25-Feb-08
26-Feb-08
27-Feb-08
28-Feb-08
29-Feb-08
3-Mar-08
4-Mar-08
5-Mar-08
7-Mar-08
10-Mar-08
11-Mar-08
12-Mar-08
13-Mar-08
14-Mar-08
17-Mar-08
18-Mar-08
19-Mar-08
24-Mar-08
25-Mar-08
28-Mar-08

28-Mar-08
31-Mar-08
1-Apr-08
2-Apr-08
3-Apr-08
4-Apr-08
7-Apr-08
8-Apr-08
9-Apr-08
10-Apr-08
11-Apr-08
15-Apr-08
16-Apr-08
17-Apr-08
21-Apr-08
22-Apr-08
23-Apr-08
24-Apr-08
25-Apr-08
28-Apr-08
29-Apr-08

Open Price
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####

####
####
####
####
####

####

####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####

####
####
####
####
####

####

Post Acquisition

Close Price
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

Date

####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####

####
####
####
####
####

####

28-Mar-08
31-Mar-08
1-Apr-08
2-Apr-08
3-Apr-08
4-Apr-08
7-Apr-08
8-Apr-08
9-Apr-08
10-Apr-08
11-Apr-08
15-Apr-08
16-Apr-08
17-Apr-08
21-Apr-08
22-Apr-08
23-Apr-08
24-Apr-08
25-Apr-08
28-Apr-08
29-Apr-08

Close Price
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####
####

Tata Jaguar
680.00

674.16

660.00
640.00
625.13

620.00
600.00
Op en Price

Tata Jaguar
680.00
660.00

666.86

640.00
624.43

620.00
600.00
C lo sing Pr ice

Pre Acquisition
Date
22-Feb-08
25-Feb-08
26-Feb-08
27-Feb-08
28-Feb-08
29-Feb-08
3-Mar-08
4-Mar-08
5-Mar-08
7-Mar-08
10-Mar-08
11-Mar-08
12-Mar-08
13-Mar-08
14-Mar-08
17-Mar-08
18-Mar-08
19-Mar-08
24-Mar-08
25-Mar-08
28-Mar-08

Post Acquisition

Total Turnover(Rs.) Mn
58.6
71.2
37.5
54.0
66.7
287.9
106.9
109.5
108.9
112.0
77.3
87.0
179.7
84.0
72.1
99.5
116.3
161.5
112.0
70.4
888.7

57.6
103.5
110.6
125.0
136.0
145.0
102.9
98.9
113.0
108.0
100.0
104.5
110.3
106.7
112.3
111.9
269.8

106.5
124.0
123.9
121.6
119.2
113.6
104.6
104.9
107.2
105.9
106.7
109.1
142.2

Date

119.0
120.4
116.5
112.7
109.9
107.2
105.8
106.8
114.2

115.7
113.4
110.4
108.5
108.8

111.4

28-Mar-08
31-Mar-08
1-Apr-08
2-Apr-08
3-Apr-08
4-Apr-08
7-Apr-08
8-Apr-08
9-Apr-08
10-Apr-08
11-Apr-08
15-Apr-08
16-Apr-08
17-Apr-08
21-Apr-08
22-Apr-08
23-Apr-08
24-Apr-08
25-Apr-08
28-Apr-08
29-Apr-08

Total Turnover(Rs.) Mn
888.7
123.6
138.9
373.7
108.5
71.6
76.6
20.9
204.0
40.2
27.0
37.0
69.9
34.5
54.4
62.3
40.4
74.2
86.9
78.2
99.5

326.7
163.3
153.9
130.3
96.3
82.7
73.7
65.8
75.6
41.7
44.6
51.6
52.3
53.1
63.6
68.4
75.8

Tata Jaguar
150.00
100.00

111.36
67.89

50.00
T urno ver

174.1
125.3
107.4
89.8
78.8
67.9
60.3
55.9
53.2
48.7
53.0
57.8
62.7

115.1
93.8
80.8
70.5
63.2
57.2
54.2
53.7
55.1

84.7
73.1
65.2
59.8
56.7

67.9

Pre Acquisition
Date
22-Feb-08
25-Feb-08
26-Feb-08
27-Feb-08
28-Feb-08
29-Feb-08
3-Mar-08
4-Mar-08
5-Mar-08
7-Mar-08
10-Mar-08
11-Mar-08
12-Mar-08
13-Mar-08
14-Mar-08
17-Mar-08
18-Mar-08
19-Mar-08
24-Mar-08
25-Mar-08
28-Mar-08

Post Acquisition

High Price
710.0
709.0
714.0
715.9
714.5
717.4
709.8
710.8
711.7
696.0
677.8
681.0
675.0
645.5
644.3
630.0
623.0
654.9
667.5
684.0
660.0

Date

712.7
714.1
714.3
713.7
712.8
709.1
701.2
695.5
688.3
675.1
664.7
655.2
643.6
639.5
643.9
651.9
657.9

713.5
712.8
710.2
706.5
701.4
693.8
685.0
675.7
665.4
655.6
649.4
646.8
647.4

708.9
704.9
699.4
692.5
684.3
675.1
666.2
658.6
652.9

698.0
691.2
683.5
675.3
667.4

683.1

Pre Acquisition
Date
22-Feb-08
25-Feb-08
26-Feb-08
27-Feb-08
28-Feb-08
29-Feb-08
3-Mar-08
4-Mar-08
5-Mar-08
7-Mar-08
10-Mar-08
11-Mar-08
12-Mar-08
13-Mar-08
14-Mar-08
17-Mar-08
18-Mar-08
19-Mar-08
24-Mar-08
25-Mar-08
28-Mar-08

660.0
645.0
633.0
645.0
652.0
644.8
635.0
636.0
634.5
640.0
633.8
634.5
633.0
624.0
631.5
634.7
638.0
644.9
648.0
643.0
648.4

647.0
644.0
642.0
642.5
640.4
638.0
635.8
635.7
635.2
633.1
631.3
631.5
632.2
634.6
639.4
641.7
644.5

643.2
641.4
639.8
638.5
637.0
635.6
634.2
633.4
632.7
632.6
633.8
635.9
638.5

640.0
638.5
637.0
635.7
634.6
633.7
633.3
633.7
634.7

637.2
635.9
634.9
634.2
634.0

635.2

624.7
617.7
615.5
617.0
614.6
614.6
618.6
618.0
615.6
614.6
614.4
613.4
618.6
621.5
625.5
627.3
630.3

617.9
615.9
616.1
616.6
616.3
616.3
616.2
615.2
615.3
616.5
618.7
621.3
624.7

616.6
616.2
616.3
616.1
615.9
615.9
616.4
617.4
619.3

616.2
616.1
616.1
616.3
617.0

616.3

Post Acquisition

Low Price
690.3
695.0
700.0
705.0
701.0
688.3
686.0
691.3
700.0
658.0
640.0
655.1
642.0
615.0
620.4
596.2
598.0
625.0
651.1
670.0
634.6

28-Mar-08
31-Mar-08
1-Apr-08
2-Apr-08
3-Apr-08
4-Apr-08
7-Apr-08
8-Apr-08
9-Apr-08
10-Apr-08
11-Apr-08
15-Apr-08
16-Apr-08
17-Apr-08
21-Apr-08
22-Apr-08
23-Apr-08
24-Apr-08
25-Apr-08
28-Apr-08
29-Apr-08

High Price

Date

698.3
697.9
696.1
694.3
693.3
684.7
675.1
668.9
659.0
642.0
634.5
625.7
614.3
610.9
618.1
628.1
635.7

696.0
693.2
688.7
683.2
676.2
665.9
655.9
646.0
635.1
625.5
620.7
619.4
621.4

687.5
681.5
674.0
665.5
655.8
645.7
636.7
629.4
624.4

672.8
664.5
655.5
646.6
638.4

655.6

28-Mar-08
31-Mar-08
1-Apr-08
2-Apr-08
3-Apr-08
4-Apr-08
7-Apr-08
8-Apr-08
9-Apr-08
10-Apr-08
11-Apr-08
15-Apr-08
16-Apr-08
17-Apr-08
21-Apr-08
22-Apr-08
23-Apr-08
24-Apr-08
25-Apr-08
28-Apr-08
29-Apr-08

Low Price
634.6
620.0
615.5
632.2
621.1
600.0
609.0
623.0
620.1
621.0
620.0
606.0
611.0
615.0
620.0
615.0
632.1
625.5
635.1
628.9
630.0

Tata Jaguar
700.00
680.00

683.08

660.00
640.00

635.22

620.00
600.00
Hig h Price

Tata Jaguar
660.00

655.57

640.00
620.00

616.35

600.00
580.00
Lo w Pr ice

INTERPRETATION
The calculation of five days moving average for the previous as well as
later month from the date of merger is shown. It takes into account the
open, high, low, close, daily turnover as well as calculation of abnormal
return. This takes into account the daily volatilities of the share prices.
Here, the daily average prices have fallen in terms of all prices and
even the turnover has decreased. This shows that the investors are
not happy with the valuation of merger and so the overall sentiment
among the investors is very poor. There are certain shareholders
who expect the share prices to fall even much more as compared to
actual fall that has taken place and so they have reduced trading
activities and tried to sell and come out of the situation as soon as
possible.

COMPANYS RETURN BEFORE AND AFTER ACQUISITION

Pre Acquisition
Date

Ex. Return

Abnormal Return

Cumm. Ab. Return

2/25/2008
2/26/2008
2/27/2008
2/28/2008
2/29/2008
3/3/2008
3/4/2008
3/5/2008
3/7/2008
3/10/2008
3/11/2008
3/12/2008
3/13/2008
3/14/2008
3/17/2008
3/18/2008
3/19/2008
3/24/2008
3/25/2008
3/28/2008

1.75%
0.89%
0.12%
0.00%
-1.37%
-5.12%
-2.02%
1.25%
-3.42%
-0.31%
1.26%
0.04%
-4.77%
2.64%
-6.03%
0.17%
1.10%
1.98%
6.09%
0.96%

-0.01%
-0.01%
-0.01%
-0.01%
-0.01%
0.00%
-0.01%
-0.01%
-0.01%
-0.01%
-0.01%
-0.01%
0.00%
-0.01%
0.00%
-0.01%
-0.01%
-0.01%
-0.02%
-0.01%

-0.01%
-0.02%
-0.03%
-0.04%
-0.05%
-0.05%
-0.06%
-0.07%
-0.08%
-0.09%
-0.10%
-0.11%
-0.11%
-0.13%
-0.13%
-0.14%
-0.15%
-0.16%
-0.18%
-0.19%

Date

Ex. Return

Abnormal Return

Cumm. Ab. Return

3/31/2008
4/1/2008
4/2/2008
4/3/2008
4/4/2008
4/7/2008
4/8/2008
4/9/2008
4/10/2008
4/11/2008
4/15/2008
4/16/2008
4/17/2008
4/21/2008
4/22/2008
4/23/2008
4/24/2008
4/25/2008
4/28/2008
4/29/2008

-4.40%
-0.11%
0.79%
0.52%
-3.06%
2.68%
-1.07%
1.29%
-0.60%
0.71%
2.17%
0.56%
1.45%
1.55%
0.27%
-0.51%
0.14%
2.40%
-0.64%
2.11%

-0.04%
0.00%
0.00%
0.00%
-0.03%
0.02%
-0.01%
0.01%
-0.01%
0.00%
0.02%
0.00%
0.01%
0.01%
0.00%
-0.01%
0.00%
0.02%
-0.01%
0.02%

-0.04%
-0.04%
-0.03%
-0.03%
-0.06%
-0.04%
-0.05%
-0.04%
-0.05%
-0.04%
-0.03%
-0.02%
-0.01%
0.00%
0.00%
-0.01%
-0.01%
0.01%
0.01%
0.02%

Post Acquisition

3/
8/
08
3/
10
/0
8
3/
12
/0
8
3/
14
/0
8
3/
16
/0
8
3/
18
/0
8
3/
20
/0
8
3/
22
/0
8
3/
24
/0
8
3/
26
/0
8
3/
28
/0
8

3/
6/
08

3/
4/
08

3/
2/
08

2/
25
/0
8
2/
27
/0
8
2/
29
/0
8

0.00%

-0.05%

-0.10%

-0.15%

-0.20%

-0.25%

Cumm. Ab. Return

0.03%
0.02%
0.01%

4/
26
/0
8
4/
28
/0
8

4/
20
/0
8
4/
22
/0
8
4/
24
/0
8

4/
12
/0
8
4/
14
/0
8
4/
16
/0
8
4/
18
/0
8

4/
8/
08
4/
10
/0
8

4/
6/
08

-0.02%

4/
4/
08

3/
31
/0
8

-0.01%

4/
2/
08

0.00%

-0.03%
-0.04%
-0.05%
-0.06%
-0.07%

INTERPRETATION
As we can see from the line chart that the cumulative return before
merger was negative and the entire trend is moving in the negative
direction due to poor returns of tata motors.
A soon as the acquisition took place, the highly profit generating Jaguar
as well as Land Rover added to the profit and earnings of the tata motors.
The brand value of JLR added to the highly reputable Tata Group and the
companys balance sheet. This can be clearly seen in the line chart above.

RATIO ANALYSIS
TATA MOTORS (27- 03 2008)
Debt-Equity Ratio
ROCE (%)

Preacquisition
0.56
30.52

Postacquisition
0.97
6.88

Change (%)
42.27
-343.60

net profit margin

6.88

11.47

40.02

P/E
ROE(%)
EPS
OPM(%)

15.45
30.98
47.1
11.16

9.59
5.34
18.81
7.89

-61.11
-480.15
-150.40
-41.44

TATA MOTORS 27- 03 2008 pre

TATA MOTORS 27- 03 2008
post

INTERPRETATION
Debt equity ratio is increasing by 42.27% as Tata took loan of banks to
acquire JLR.ROCE increases vey high by 343.60% as compared to pre
acquisition as it gauges that company that generate its earnings from the
total pool of capital which indicates profitability.Net profit margin
increases as it income increases in post acquisition as compared to pre
acquisition. P/E highly decreases in post acquisition by 60.1% which in
investor point of view they will be profitable to invest to get high earning.
ROE is highly increasing by 480.15% which shows that it has more equity
than debt. EPS is increasing drastically by 480.15% which is very
profitable for investors. Operating profit margin is reduced by 41.44%
which shows that company profit margin is very less.

This question is answered by the latest nancial results of JLR. The key nancial
metricsfrom their statements show a rosy picture. The acquisition had really paid off
in terms ofnancial stability of JLR