NEW DELHI: Tata Motors, part of India's fast-growing Tata Group, is buying Jaguar and Land Rover from beleaguered Ford Motor for $2.3 billion.
The purchase price is more than the market expected, but still about half what Ford originally paid for the brands several years ago. The long-awaited deal, which was announced Wednesday, also carries a painful payout for Ford. After the transaction closes, which is expected midyear, Ford will give Tata $600 million to make up for shortfalls in the two brands' pension plans.
Tata Group, one of India's largest conglomerates, has been on an overseas acquisition spree in recent years, buying up everything from tea and coffee companies to steel manufacturers. Other Indian companies are also eyeing overseas acquisitions as a weak dollar, coupled with strong domestic growth, make takeovers attractive, particularly in the United States.
When Tata does deals, it rarely changes the character of the company that it buys over the near term. Ratan Tata, the chairman of Tata Sons and Tata Motors, reiterated that strategy on Wednesday, saying the Tata Group "will endeavor to preserve and build on their heritage and competitiveness" of the two brands, while "keeping their identities intact." No changes are expected to employment terms for the approximately 16,000 employees of Jaguard and Land Rover.
Ford is in the midst of a painful overhaul, shedding costly units and workers in the United States. The Ford chief executive and president, Alan Mulally, said in a statement he was confident that Jaguar and Land Rover would thrive under their new owners.
"Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Company that delivers profitable growth for all," he said.
Ford has lost $15 billion in the past two years.
Ford will continue to provide some components, including power trains, to Jaguar and Land Rover, which are built in Britain, as well as some research and development support. Ford's finance arm, Ford Motor Credit, will continue to provide financing to Jaguar and Land Rover dealers and customers for up to 12 months.
Source: http://www.iht.com/articles
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