JLR Parks in Tata Garage

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Mumbai, Mar 26: Unions back $2.3-bn deal; stock flat

Ending months of speculation, the $7.2-billion Tata Motors Ltd announced on Wednesday that it had entered into a definitive agreement with Ford Motor Company for the purchase of Jaguar Land Rover (JLR)—comprising the marquee brands, plants and intellectual property rights—for a sum of $2.3 billion to be paid in cash. The transfer of ownership to Tata Motors is expected to close by the end of the next quarter, subject to regulatory approvals.

The purchase of JLR by the Tata group marks yet another milestone in a series of high profile acquisitions that the Indian group, once known for being conservative and slow-moving, has made of late. Last year, it bought UK steelmaker Corus Plc for a jaw-dropping $12.7 billion.

The latest acquisition also means that Tata Motors now owns one of the most prestigious brands in the global automobile space and can boast a full range of cars, right from the Rs 1- lakh category to Rs 1 crore. Tata Motors will also finally have access to the global market, despite a ten-year presence in the domestic car market. Tata Motors will be the 100% owner of JLR. At the transfer of ownership, Ford will contribute up to approximately $600 million to the Jaguar Land Rover pension plans.

Commenting on the deal, Ratan Tata said, “We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact. We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business.”

Addressing a conference call on Wednesday evening, Tata Motors managing director Ravi Kant, one of the chief architects of the deal, said the transaction would be funded by bridge financing of $3 billion from a clutch of banks, later replaced by a mix of long-term debt, equity and some disinvestments from Tata Motors’ holdings in group companies. “The circumstances and market conditions will determine the extent of funding,” C Ramakrishnan, CFO, Tata Motors, added.

Declining to divulge further details of JLR’s financials at this point, Ramakrishnan said the turnover was upwards of $14 billion and that the combined JLR was a profitable entity.