The Jaguar and Land Rover deal has been sealed, and the two companies go to Tata Motors, which will pay US$2.3 billion for them. As part of the deal, Ford will inject US$600 million of the US$2.3 billion into the two companies’ pension funds, leaving about US$1.7 billion remaining for Ford’s coffers. Ford will have no stake in the companies after the sale is completed.
Most of the management team will be retained, and Ford will continue to supply Jaguar and Land Rover with powertrains and technology for the time being, depending on existing supply agreements. Ford Motor Credit Co will also provide financing for Jaguar and Land Rover dealers and customers for the period of up to 12 months. The deal includes the Rover, Daimler and Lanchester brand names.
Tata Motors says it was confident this investment would have a positive effect on its balance sheet in the long run. Shareholders do not seem to share these sentiments as Tata Motors shares dropped as much as 7.3% yesterday, finally settling on a 3.6% drop at the end of the day as analysts says the deal will be a strain on the balance sheet. As for Ford, the money will help it focus on turning around its North American operations, which are currently operating at a loss.
The other bids for Jaguar and Land Rover are former Ford CEO Jacques Nasser’s One Equity Partners, Ripplewood, and Texas Pacific Group, which was advised by Bob Dover, CEO of Jaguar and Land Rover between 2002 and 2003.