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Jaguar/Land Rover Sale – Rumors Heat Up That Tata Will be Buyer

Jag XF 2009 Upper F34.jpg

The rumors are heating up that the buyer of Jaguar and Land Rover is close to being finalized. The front runner appears to be the huge Indian conglomerate Tata and its automotive arm Tata Motors. Others involved in the due diligence process thought to be less advantageous to Jaguar Land Rover for various reasons. The two private equity firms – Apollo and One Equity Partners (led by former Ford CEO Jacques Nasser) – are thought to be a bit too aggressive to have the best interests of the Jaguar and Land Rover brands and their workers at heart. Profit, profit, profit is the name of the game among the private equity sharks. A second car company that is interested in JLR is Mahindra & Mahindra another Indian manufacturer specializing in SUVs and 4×4 vehicles. M&M may be a good fit with Land Rover, but Jaguar is well out of their experience zone.
So, Tata may be the winner when the dust settles adding JLR to its recent acquisitions of Tetley Tea and Corus Steel.
A November 23 Economist article is below the fold with more details.


Why Tata Motors is favourite to buy Jaguar and Land Rover
Economist.com: November 23, 2007
Jaguar For sale, one careful owner
THE sale by Ford of the two British premium marques, Jaguar and Land Rover (JLR), is fast approaching its conclusion. This week the three preferred bidders chosen by Ford, which has insisted that the two companies be sold together, have been presenting their plans to the British government and the unions. They are Tata Motors, India’s biggest carmaker; Mahindra & Mahindra, an Indian maker of utility-vehicles, together with Apollo, a private-equity firm; and One Equity Partners, another private-equity firm. Some time in the next few weeks one of them will carry off two of the car industry’s most evocative brands—and a heap of risk.
Ford wants a sale because its chief executive, Alan Mulally, wants to focus on turning round its North American business. He and other Ford managers are brutally frank in declaring that they are in a race against time that they may not win. A year ago, Ford mortgaged its assets in exchange for a $23.4 billion financing package to help it restructure. Mr Mulally has promised a return to profit in 2009.
Selling JLR may relieve Ford’s management of an unwelcome distraction, but it will not provide a big boost to its coffers. The three bidders’ offers are believed to be in the region of $1.5 billion. Ford could push the price up through an auction, but it is more concerned about doing a deal that is seen to be in the best interests of JLR and its 16,000 workers. This is not entirely altruistic. Britain is Ford’s second-most-important market and it wants to be seen as a good corporate citizen. It also wants to stay on good terms with the unions.
The biggest union, Unite, wants to keep production, design and as much of the supply chain as possible in Britain. The most difficult issue will be the future of the Halewood factory in Liverpool, where the Land Rover Freelander and the Jaguar X-type are made. With a combined output of 261,000 units last year, JLR’s need for three factories is questionable.
The bidder most likely to meet Ford’s and the unions’ requirements is Tata Motors. Although Unite’s leader, Tony Woodley, has a soft spot for Jacques Nasser, the former Ford boss who is leading One Equity’s bid, Ford is not convinced that it would give JLR the long-term stability it needs. There are also some concerns about the bid from Mahindra & Mahindra and Apollo. Initially, the Indian firm was interested in purchasing only Land Rover, for its four-wheel-drive technology.
Ratan Tata, the chairman of the Tata empire, sees the purchase of Jaguar and Land Rover differently. After other acquisitions, such as Tetley Tea and Corus, an Anglo-Dutch steel group bought for $13.2 billion earlier this year, Tata wants to increase its scope and scale in another industry. It longs for the kudos that would come from owning two such famous brands, and it has plenty of cash.
Some Ford executives believe that Tata would be buying Jaguar (after $10 billion of losses during 18 years of Ford ownership) and Land Rover just as they are coming good. Jaguar is about to start selling the new XF, its most exciting-looking saloon in a generation, and Land Rover sold a record number of vehicles in the past quarter and is solidly profitable.
But there is also risk aplenty. JLR depends on America for more than a quarter of its sales, so it is suffering from the dollar’s weakness. Tata knows how to make cheap cars, but JLR operates in a totally different part of the market. And with tough new European emission laws due next month, JLR lacks the resources to bring fuel-saving technologies to its vehicles at the same speed as its German rivals, BMW and Mercedes, which are investing heavily in new super-efficient diesels and hybrid powertrains. Consequently, JLR faces the prospect of paying a fine on each vehicle it sells in Europe after 2012. Jaguar and Land Rover are great brands going cheap. But it is not an investment for the faint-hearted.

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