Like the Tata Corus deal, the purchase of Jaguar and Rover by the Tata Group is expected to raise a few eyebrows, especially amongst the analyst community. And, like the earlier deal, this deal, speculated at $2.65 billion, has three elements which are being closely watched.

First, the Indian car-manufacturer may directly buy out the brands in an all cash deal. Second, the company may float a special purpose vehicle (SPV), considering the mammoth amount involved in the deal, which would, in turn, acquire the Jaguar and Land Rover brands. And in the long run, the company might merge the SPV with it. Thirdly, the nature of the negotiations and the non-compete agreements that the management has with Ford and its dealers.

Overall, analysts reckon the takeover will enable Tata Motors to tap the global market and also piggyback on the distribution network that Ford has built over the years. The Jaguar and Land Rover brands have a combined presence in countries such as the US , UK , Italy, Russia , Spain , Japan , and Germany.

However, an auto analyst with a brokerage firm points out, ?It may be a big deal for Tata Motors. Also the company won’t be able to get outsourcing from India and is unlikely to introduce Jaguar or Land Rover to the Indian market, considering the absence of any markets for the products.?

The concern on the short-term earnings for Tata Motors will remain. Tata Motors has had a strong balance sheet with a debt to equity of around 0.59:1. And with borrowings estimated to grow by Rs 4,000 crore ($3 billion for this acquisition) it will remain strong at 1.15:1, but interest outgo will be additional. “The extent of this will depend on the deal structuring,” the analyst adds.

The integration of Jaguar and Rover in the consolidated books of Tata Motors might take some time.Already, Jaguar and Rover have not been faring well. In India, Tata Motors’ consolidated growth of Rs 1,722.72 crore for the nine months ended December 31, 2007, a 13% climb in the same period of the previous year, was tad below expectations. Its domestic sales volume for the first nine months was 3, 68,788 units was seen as flat when compared to 3,69,091 units during the corresponding period last year.

There are other analysts who reckon that Tata Motors might actually get a great deal. Ford is reported to have spent $2.5 billion in 1989 when it acquired Jaguar and $2.75 billion in 2000 for Land Rover. The $12.6 billion loss in 2006, the largest in its 103-year history, seemed to have forced Ford to make a rather distressed sale, and Tata Motors could be the beneficiary.