Jaguar-Rover: Another New Year gift for Tatas?
Last year the Tatas celebrated New Year in high spirits as by then it was within striking distance of snapping up Anglo-Dutch steel maker Corus, for about $13 billion to become the world’s fifth largest steel producer. This time around a similar spirit pervades Bombay House, as the stage appears set for the Tatas to clinch another overseas acquisition — in the automobile segment.
Tatas look certain to emerge as the winning bidder for Ford’s iconic brands, Jaguar and Land Rover, outpacing its domestic rival Mahindra & Mahindra and the American buyout group OneEquity. “As of now, Tatas are ahead in the race and, barring any last-minute surprises, are most likely to be named as the preferred bidder,” a source close to the development said.
Agency reports claim that the Tatas have offered $2.05 billion for the two brands, thwarting rival Mahindra & Mahindra’s bid of $1.9 billion. Sources say Mahindra & Mahindra was unlikely to up its bid any further to knock out the Tata bid.
While it was successful in taking over Corus, more recently, the software conglomerate’s efforts to forge a strategic alliance between one of the group companies, India Hotels, which owns the Taj Group of hotels, and Oriental Express hit a wall.
The US-based hotel chain, in which the Taj Group has 11.5 per cent stake, turned down for the second time Tata’s proposal for a strategic tie-up earlier this month.
Eye on market
Tata Motors acquisition of Jaguar and Land Rover will give it a wide spectrum of product portfolio within the automotive space. While at one end it will have the Rs 1-lakh car, which may become the world’s cheapest car in this category when it rolls out of the factory in 2008, at the other end it will have the two iconic brands from the Ford stable.
Sources following the development say that the Tatas could be interested more in outsourcing components for the two brands into India than actually owning the brands in the long run. “The company could make most of the components for the two brands in India and send them to the original assembly lines,” Mr S. Ramnathan, an auto analyst with SSKI, said.
Union backing
What is likely to tilt the balance in favour of the Tatas for the brand acquisition is that the trade unions at the Ford factories have backed the group as the dominant feeling is that the Indian manufacturer could offer more long-term security. Tatas plan to retain all three of the UK factories producing the two brands.
Foreign media reported that the unions had insisted that Ford involve all leaders in any decision on the sale of the brands. Tatas will also have to separately negotiate with the pension trustees to finally clinch the deal.
Tata Motors revenues touched $7.2 billion in 2006-07, with an estimated 4 million Tata vehicles plying across India. Tata Motors and Fiat Auto have formed an industrial joint venture in India to manufacture passenger cars, engines and transmissions for the Indian and overseas markets.
Its international footprint includes Tata Daewoo Commercial Vehicle Co in South Korea, Brazil-based body-builder of buses Hispano Carcopolo and a joint venture with Thonburi Automotive of Thailand.
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