Tata Motors - Financing the Acquisition of Jaguar and Land Rover
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Case Details: |
Price: |
| Case Code |
: |
FINC050 |
For delivery
in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges
ThemesSources of Finance, Capital Structure, Capital Budgeting |
| Case Length |
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21 Pages |
| Period |
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2008-2009 |
| Pub. Date |
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2009 |
| Teaching Note |
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Available |
| Organization |
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Tata Motors |
| Industry |
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Automobiles |
| Countries |
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UK/India |
Abstract:
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In June 2008, India-based Tata Motors acquired Jaguar and
Land Rover (JLR) from the US-based Ford Motors for US$ 2.3 billion. To finance
the acquisition, Tata Motors raised a bridge loan of US$ 3 billion from a
consortium of banks. Tata Motors planned to raise Rs. 72 billion through three
simultaneous but unlinked rights issues. However, the rights issue ran into
problems as the share price of Tata Motors continued to slide down, after the
issue opened. The shares were available in the stock market at a much lower
price compared to the price offered by the company. Other options to obtain
funds like divesting stake in the group companies, floating international equity
related issues were also scrapped, due to adverse market conditions.
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At this juncture, in order to obtain funds,
Tata Motors announced public deposit scheme in December 2008.
Through all the fund raising efforts, the company was able to
repay only US$ 1 billion by the end of 2008. Tata Motors was
required to repay the entire amount of bridge loan by June 2009.
Due to adverse financial conditions and credit freeze, Tata
Motors announced that it was planning to roll over the bridge
loan, which was estimated to further add to the debt burden of
the company.
Issues:
» Understand acquisition of JLR as an example of Tata Motors' inorganic growth
strategy.
» Understand the impact of macroeconomic factors on the global automobile
industry.
» Understand the implications of global credit crisis on the availability of
funds for corporates.
» Analyze different modes of finance available to finance cross border
acquisitions.
Contents:
Keywords:
Tata Motors, Ford, Jaguar, Land Rover, Acquisition, Bridge loan, Global financial crisis, Leverage, Debt Financing, Rights issue, Differential voting rights, Overseas floatation, Convertible preference shares, Fixed deposit schemes, Capital Budgeting, Capital Structure, Sources of Finance
Tata Motors - Financing the Acquisition of Jaguar and Land Rover
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