Tata gets JLR for knock-down price

Ford will pay about $600 million to the Jaguar-Land Rover pension funds.

After nine months of negotiation, Tata Motors finally signed a deal to buy luxury brands Jaguar and Land Rover (JLR) from Ford Motor for $2.3 billion in cash, the largest acquisition by an Indian company in the automobile business.

The purchase price is less than half what Ford paid ($2.5 billion each) to acquire the two brands. Ford bought Jaguar in 1989 and Land Rover from BMW in 2000.

The deal will extend Tata Motors’ product portfolio span from a price point of $2,500 to $170,000 and expand its distribution network more than four times to 2,700 outlets in 138 countries.

Ford will pay about $600 million to the Jaguar Land Rover pension funds, the two companies said in a joint statement today.

Along with the two brands the deal will involve the acquisition of plants and Intellectual Property Rights (IPR) held by the two brands.

The transfer of ownership to Tata Motors is expected to close by the end of the next quarter subject to regulatory approvals.

Tata Motors will raise $3 billion (Rs 12,000 crore) through bridge finance for 15 months from a clutch of banks, including JP Morgan, Citigroup and State Bank of India (SBI) to finance the deal. This will be replaced by a combination of long-term debt and equity.

The company is also planning to raise money through equity divestment in some Tata Motors subsidiaries in the next few months.