NEW DELHI (AP) _ For India, a former British colony, a takeover
of Jaguar and Land Rover would be a boost to local pride and a sign
of India's economic rise.
But many investors and automotive industry analysts question
whether a bid by India's Tata Motors _ maker of workhorse trucks and
low-end mass market cars _ for the two luxury brands would make much
Chairman Ratan Tata confirmed last month that he is clearly
interested in entering the competition for the iconic Britain-based
auto makers, which have been put on the auction block by
financially-troubled Ford Motor Co. Several U.S. private equity
firms are also expected to submit bids.
The greying, distinguished Tata has said such an acquisition
would help bring global visibility to his group _ a sprawling
conglomerate that makes everything from automobiles to steel and
software, and a name that until recently was little-known outside
Tata Steel made a splash in January when it won a bidding war to
buy Anglo-Dutch steel maker Corus Group PLC for US$12.1 billion.
That deal, India's biggest foreign acquisition, highlights the
country's recent outward expansion into the global economy.
But while the Corus acquisition was widely seen as a good match _
and since appears to be paying off _ experts don't see similar
synergies in a Tata Motors takeover of Jaguar and Land Rover.
Long a giant in truck and bus manufacturing, Tata has only about
a decade of experience selling cars _ and most recently, has grabbed
headlines with its plan to make an ultracheap car costing just about
$2,400. The company has been successful selling into the burgeoning
Jaguar and Land Rover are luxury brands that cater to a small
percentage of customers and have a limited distribution network.
What Tata needs more, if it wants to reduce its dependence on Indian
buyers, is a large overseas sales network that targets the mass
market, experts say.
``It makes no sense at all,'' said S. Ramnath, an auto analyst at
Mumbai-based brokerage firm SSK Securities Ltd. ``It's passion that
is behind this move.''
Morgan Stanley analyst Balaji Jayaraman called such an
acquisition ``value-destructive given the lack of synergies and the
high-cost operations involved,'' in a note to clients.
Still, people tracking the matter say Tata Motors has a good
chance of bagging the bundled sale of the Jaguar and Land Rover
brands. A possible bid from the Indian automaker puts it in
competition with U.S. private equity firms, including One Equity
Partners LLC. and Ripplewood Holdings LLC that each have partnered
with former Ford executives.
Morton Pierce, head of mergers at the New York-based law firm
Dewey Ballantine LLP., thinks Tata has an edge because U.S. private
equity firms might find it difficult to raise funds for such
acquisitions in the midst of a credit shortage sparked by trouble in
the mortgage market.
An executive with an European consulting firm with close ties to
Jaguar said Tata Motors has a high probability of winning if it
bids. The executive didn't want to be identified because his
association with the acquisition target.
Ford Motor Co., which lost $12.7 billion last year, has been
looking to sell Jaguar and Land Rover, which have been hit by
unfavourable exchange rates and high production costs in Britain.
The company doesn't break up its earnings for these units, but has
said it never made money from Jaguar since buying it in 1989. Land
Rover is performing better due to new models introduced last year.
Ford has not said how much it wants for the combined units, but
analysts have estimated they could be worth about $1.5 billion.
If the acquisition swings in favour of Tata Motors, it would
surely add to the national pride of many Indians. They see buyouts
like these boosting India's image abroad _ the excitement often gets
amplified when the acquisition target is in Britain, which ruled
this country for two centuries.
``Why do we have to always weigh everything in terms of money?
It's about image, respect. I think the idea is good,'' said Rabindra
Tripathy, a retired government bureaucrat.
Tata, the chairman, said in a recent television interview that
Jaguar and Land Rover could help expand Tata Motors' access to
markets overseas and reduce its dependence on Indian sales, which
currently account for more than 90 per cent of its revenue. ``It is
to give ourselves scale, to give ourselves global reach,'' he said.
Tata is no stranger to criticism, and has had a long record of
proving his critics wrong.
Tata Steel's earnings report for the April-June quarter showed
the Corus acquisition has begun to pay off faster than most analysts
expected. Its stock has since bounced back and risen to an all-time
The group's tea unit was also criticized for paying too much _
$677 million _ for a 30 per cent share in New York-based flavoured
water company Energy Brands Inc. in August last year.
But Tata had the last laugh when Coca Cola Co. bought Energy
Brands nine months later _ paying $1.2 billion for Tata's stake.