Indian companies are becoming increasingly aggressive acquirers abroad as they seek diversification and growth.
Tata group which is responsible for India’s biggest foreign takeover, by acquiring the British steel company Corus through his Tata Steel business for £6.7bn earlier this year, is now reckoning for another big acquisition, this time for its automotive division.
The British paper, Birmingham Post, reiterates the same estimate we’ve heard before, that Tata will be doling out around £1 billion, or $2 billion USD, for the right to own these two storied brands, and perhaps is confirmed the buyout of Jaguar and Land Rover. Ford bought Jaguar for £1.6bn in 1989 and it is believed that have invested about $10bn in Jaguar since then, and bought the Land Rover from BMW for £1.7bn in 2000. According to other numerous published reports, Ford is expected to announce within days, that India’s Tata Motors will be the preferred bidder for the Jaguar and Land Rover brands.
Folks might have snickered and sneered before, but India’s Tata appears to be in the catbird seat for the chance to gobble up Jaguar and Land Rover. After the other Indian bidder, Mahindra & Mahindra, dropped out because of a questions over the Ford parts supply, the two bidders left are Tata and One Equity Partners (a buyout company). Tata is being advised by Fiat in the bid, with which Tata Motors has a joint venture to make premium cars for the Italian firm, and One Equity is the private investment firm whose bid is led by former Ford exec Jac Nasser.
The British trade union Unite, which represents workers from both brands, met with the bidders and — while it still opposes the sale entirely — declared that “based on serving the best interests of the union members at Jaguar-Land Rover, the stewards agreed that Tata best fits these criteria.” Tata has also stated that the three British factories used to produce Jaguar and Land Rover vehicles will be retained as well as is committed to the two brands as a long-term investment and endorsed their current management. Also, Fiat’s ready to help its partner in the form of technical support should Tata purchase Ford’s British nameplates.
Tata Elegante Concept (hmm … work that concept)
2009 Jaguar XF (nice, really nice)
Land Rover LRX Concept (one word - Wow)
People are asking whether Tata deal could adversely impact the value of the luxury brand, as it is currently in process of launching its ‘People’s Car’ with a price tag of about $2,500, which is about one-twentieth of the cost for least expensive Jaguar model. Personally, I don’t think so. Indian companies have managed big brands before, have worked with renowned international brands and partners, and have enough experience. After all, even Ford was not able to up the ante of a prestigious brand such as Jaguar, instead from what I have seen and believe, it nearly destroyed the brand. I am quite sure that Tata can handle a car that costs $120,000 side by side with that costing only $2,500, when it comes to production, management and quality control. The combination of luxurious, specialised products and cheap, commodified ones may seem like an unlikely business model, but the Tata Group is full of similar contradictions, as are other Indian companies.
“A century earlier, when Tata founder Jamsetji Tata suggested making steel for the colonial railway system, a British administrator dismissed the idea with barely concealed contempt. Earlier this year, Tata paid almost $14 billion to buy Corus, British Steel’s successor. The moral of that story is not lost on India’s corporate captains. They say that Western companies had better get used to the idea of Indians taking over.” - Time Magazine
So, will Tata Jaguar and Land Rover be better than Ford Jaguar? Will Indian company be able to handle such globally renowned, acclaimed and respected brands, better than American counterparts? I am quite sure that they will. As for the country, it is good to see India’s sons doing major deals around the world, thus putting India as a major international player in a lot of markets and industries, and reaping significant technology transfer benefits from the takeovers.
Just don’t panic …. it is all part of what we all now know as globalisation.
UPDATE 26th March 2008: Ford has issued a press release confirming that it has sold both Jaguar and Land Rover to Tata Motors for an approximate price of $2.3 billion.
