Merger & acquisition of tata jaguar & land rover & demerger of hero honda

1. WELCOME
TO PRESENTATION OF
MERGER AND AQUICISION

2. Presented By:-
Sandeep Mane
Rajesh Mankar
Omkar Warde
Vishal Kokane
Ankit
Sanket Dond

3. WHAT IS MERGER & ACQUISITION ?

4. MERGER

5. TATA MOTORS, JAGUAR & LAND ROVER
OVERVIEW

7. • TATA GROUP is 150 year old, Previously Tata Engineering
and Locomotive Company, Telco.
• India's largest passenger automobile and commercial
vehicle.
• Tata Motors was established in 1945
• Listed on the New York Stock Exchange in 2004.
• It is the 5th largest medium and heavy commercial vehicle
manufacturer in the world. listed in BSE, NSE & NYSE.
Subsidiaries-
• JAGUAR CARS
• LAND ROVER
• TATA DAEWOO COMMERCIAL
TATA MOTORS OVERVIEW

9. JAGUAR OVERVIEW
 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
 Jaguar Cars Ltd. ( better known simply as Jaguar) is an
automaker from England,
• United Kingdom that manufactures luxury and executive
motor car.
• Sir William Lyons founded jaguar as the Swallow Sidecar
Company in 1922, originally making motorcycle sidecars
before switching to passenger cars.
• The name was changed to Jaguar after the second world
war due to the unfavorable connotations of the SS initials.

11. LAND ROVER OVERVIEW
• British car manufacturer founded in 1948 as a marquee
of the Rover Company.
• Known for superior off-road and road performance
• 1976 – 1 million cars running on the road
• In 1994 Rover Group is taken over by BMW
• sold to FORD MOTORS for $ 2.75 b in 2000.
• Used by military for projects and expeditions, Safe but
less reliable, Makeover in recent times
• Land Rover manufactured high-end SUVs.

12. WHY IS FORD SELLING?

13. • Reports said losses at Jaguar stood at USD 715
million in 2006.
• Jaguar was not able to provide any profit for
ford because of the high manufacturing costs
provided in the United Kingdom.
• The strong boy Land Rover's profit, on the
other hand, was driven by the record sale of
2.26 lakh vehicles, an 18% YoY growth in 2007.
• Ford was combining both the brands since the
products and manufacturing of vehicles for
Land Rover and Jaguar was so intertwined.

14. THE DEAL PROCESS

15. • 12/06/2007- Announcement from Ford that it
plans to
sell Land Rover and Jaguar.
• August 2007 - Major bidders are identified
• Likely buyers: Tata Motors, M&M, Ceribrus
capital Management, TPG Capital, Apollo
Management
• India’s Tata Motors and M&M arrive as top
bidders ($ 2.3b & $ 1.9b)
• 03/01/2008 – Ford announces Tatas as the
preferred bidders
• 26/03/2008 - Ford agreed to sell their Jaguar
Land Rover operations to Tata Motors.
• 02/06/2008 – The acquisition is complete

16. THE DEAL
100% stake in Jaguar &
land Rover Business
TAMO has acquired the business & initially they will be operated
independently of the partner.
3 Plants in UK These are well invested plants
2 advanced design &
engineering center
4-5000 engineers engaged in testing ,prototype design & powertrain
Engineering , development & integration
26 National sales
company
Both existing national sales companies of jaguar/land rover & also those
that are carved out of current Ford operation
Intellectual property
rights
This covers all key technologies to be transferred to JLR & perpetual
royalty free license on technologies shared with Ford
Capital Allowance A minimum guaranteed amount of $1.1 bn which will help managing in
Tax going forward
Support from Ford
Motor Credit
Ford Motor Credit will continue to support the sales of JLR for around
next 12 months
Pension Contributed
by Ford
Ford will contribute $ 600 mn of the Pension Fund

17. WHY TATA BUYING?

18. • Tata wanted to make a global impact and it thinks that buying these
brands at a lower rate now, will give better value later on.
• This acquisition also eases the entry of Tata in European market
which it has been eyeing for long.
• Reduce the company dependence on the Indian market which
accounted for 90% of its sales
• Opportunity to spread its business across different customer
segment
• At the price staring from 63 lakh and going upto 93 lakh, it seems
Tata has just got the right place to compete with the current market
leaders in luxury brands – BMW, Audi, Mercedes
• Publicity on an international scale
• Access to large distribution network
• JLR had many new models lined up for next 3 years, so no much
work just profits
• Strong R & D culture and facilities

19. PROBLEMS IN THE DOMESTIC MARKET

20. • The profits for the first quarter for the year
2008-09 were at 3.26 billion
• Q3 the sales of passenger vehicles went down
to 41,287 units a drop of 14.14%
• Tata Motors cut production across different
categories.

21. POST MERGER

22. • Following Cost Rationalization initiatives were taken to improve cash flows:
1] Single shifts and down time at all three UK assembly plants.
2] Supplier payment terms extended from 45 to 60 days in line with industry standard.
3] Receivables reduced by £133 million from 38 to 27 days.
4] Inventory reduced by £217m between June 2008 and March 2009 from 70 to 50 days .
5] Labor actions –
- Voluntary retirement to 600 employees.
- Agency staff reduced by 800.
-Offered leaves to 300 workers of Bromwhich and solihull plant.
-Additional 450 job cuts including 300 managers.
6] Agreement with Unions to implement pay freeze and longer working hours (equivalent to
approximately 20% reduction in labor costs.)
7] Engineering and capital spending efficiencies.
8] Fixed marketing and selling costs reduced in line with sales volume.
9] Reduction in all other non-personnel related overhead costs.

23. SWOT

24. Strengths:
Tata’s strong management
capability
Strong monetary base to invest
Weaknesses:
Jaguar’s declining sales record
Inexperience of handling such
luxury brands
Opportunities:
Support from Ford in terms of
Technology, Engine, IT, Accou
nting
Adding up of luxury brands in
the product line
Access to European Market
Market is volatile and driven
by new products
Strong presence of competitors
like Mercedes, BMW, Lexus
and Infinity
Tata’s Jaguar
Land Rover
Acquisition
Threats

25. DEMERGER

26. OVERVIEW OF HERO & HONDA

28. HERO INTRODUCTION
• Established in 1956 at Ludhiana.
• Production capacity has increased from the initial
15 bicycles per day to 18500 bicycles per day.
• In 1986 entered the Guinness Books of World
Records as the largest bicycle manufacturer in the
world.
• Has diversified into newer segments like
Information Technology, IT Enabled Services and
Financial Services.

30. ABOUT HONDA
• HMC initial plans called for both two-wheeler
market and the electric generator market.
• HMC first chose Kinetic Engineering Ltd. And
formed Kinetic Honda Motors Ltd. But this JV
would work in field of Scooters
Manufacturing.
• HMC came to Hero Group as the Last
compromise choice for its motorcycle venture.

31. REASONS FOR HONDA SELECTING THE HERO
GROUP

32. • Its engineering capability
• Relevance and salience of HERO brand.
• Distribution network.
• Commitment to Quality.
• Know-how and experience in handling large
volume production and distribution.
• Tight focus on financial and raw material
processes.
• Cordial Industrial Relations.

33. THE DEAL OF HERO HONDA

34. THE DEAL (JUNE 1984)
• Honda agreed to provide tech. know-how to
HHM and setting up manufacturing facilities.
This included the future R & D efforts.
• Honda agreed for a lump sum fee of $500,000
& 4% royalty on SP.
• Both Partners held 26% of the equity with
other 26% sold to the public and the rest held
to financial institutions.

35. REASONS FOR SUCCESS

36. • The deep penetration network of hero largely
benefited the sales.
• Absence of major competitors in initial years.
• Sound and proven technical capabilities of
Honda and the reliability of Hero.
• Increased market for motorcycles:
• Better Fuel efficiency.
• Change in people’s perception.
• Decrease in price difference with scooters

37. DEMERGER

38. • Relaxed govt. norms
• Enough knowledge of Indian market for honda
• Indian 2 wheeler market soon to grow in double
digits and carrying a partner could be a burden
• Honda would want to go on its own because the
9.3-million two-wheeler market will grow to 16
million by 2015
• A minority stake in Hero Honda also yields limited
profits for Honda compared with a fully
consolidated 100 percent unit.

39. THE PROCESS OF DEMERGER

40. • To buy out Honda’s 26 per cent share, first Hero
has to find bankers who can finance this deal
worth Rs 9,300 crore.
• Then it will create a special purpose vehicle
(SPV), where shares will be sold to investors,
• who will indirectly get dividends from Hero
Motors, once it uses the funds to pay back the
loans.
• These investors will get board seats in return.
• All the dividends will then be paid to these
investors and will flow into the SPV.

41. THE IMPACT OF DEMERGER

42. • The Hero group to lose market share, currently around 40-50
percent, in the long term as Honda becomes more aggressive.
• A rise in royalty payments, would hit profits at Hero Honda (
currently at around 2-3 percent of sales)
• The Hero Honda brand name will be changed over time
• the company can now establish distribution networks across the
globe.
• It would take time for Hero to develop its own technological
capabilities, and it remains to be seen whether the partners'
technology licensing would continue through 2014 as agreed under
the current contract.
• For Honda, with a wholly owned unit already in place and
expanding fast, a pull-out from the joint venture would be positive
for its growth over the long term, although it would have to make
sure its sales network is sufficiently robust to compete with Hero