Iconic brands still to be sold
By Brendan Moore
10.30.2007
It’s been sort of pushed into the background lately as a result of Ford’s recent lousy financial results and their upcoming wrestling match with the UAW, but the sale of Jaguar/Land Rover is still grinding forward, albeit slowly.
Ford expects to draw up a list of preferred bidders for the two British subsidiaries in November, and by all accounts from people inside the companies, there are at least six serious suitors for the package deal of Jaguar and Land Rover. The would-be buyers definitely include both industry and private equity buyers, and there is also the somewhat far-fetched rumor that one of the potential buyers is a private individual that has formed a legal company solely for the purpose of buying the two auto makers.
Some of the known interested private equity parties include (amazingly) Cerberus, which would seem to have its hands more than full with Chrysler, Ripplewood, Terra Firma and TPG. The strongest private-equity bid is expected to come from One Equity, the investment group headed by former Ford CEO Jac Nasser. Nasser is quite familiar with both companies, has a high opinion of both companies’ prospects and his ability to realize those prospects, and further, is reportedly champing at the bit to re-enter the auto industry.
Tata, the Indian vehicle manufacturer, is certainly one of the industry players interested in Jaguar and Land Rover. The other Indian vehicle manufacturer, Mahindra and Mahindra removed itself from the bidding two months ago.
Jaguar currently employs approximately 7300 people in England, and Land Rover employs around 8300 people, with almost all of those also in England.
One of the problems that bedevils both Ford and any purchasers of Jaguar/Land Rover is that the valuation of both companies is a moving target. Industry analysts pegged the package deal at a maximum price of $3 billion USD just a few months ago; however, ailing Jaguar has reduced both its losses and operating costs since then, and healthy Land Rover has experienced higher than projected sales of its new models. The two companies together may be worth almost $4 billion now, although this seems like wishful thinking to this writer.
Of course, for Ford, it’s not just about the money. Ford wants to keep supplying major components like engines and transmissions to both Jaguar and Land Rover and any deal is contingent on maintaining that supplier relationship. Ford also wants to replicate the terms of the recent sale of Aston Martin by retaining at least a 10% stake in both companies. Some sources suggest they may want to retain as much as 20% in Land Rover in the transaction. There may also be a “right of first refusal” clause in the agreement which would allow Ford the option of buying back either company should they be come up for sale in the future. Lastly, some of the potential buyers want Ford to lend them the money to buy the two marques, providing “staple debt financing” in order to help any buyer fund the purchase. Ford is loath to do this, but it may be required for Ford to get the deal and the buyer they want.
Ford has stated that it hopes to resolve the question of whether Jaguar and Land Rover will be sold by the end of 2007 or the first quarter of 2008. But of course this official statement from the company is disingenuous as Jaguar and Land Rover will be sold; Ford really has no choice as it desperately needs all the cash it can get to fund its turnaround efforts. The only open question is who Ford will sell the two prestigious British marques to, and for how much.
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If I had the means, I’d buy the Land Rover piece and take a pass on Jaguar. If Ford made me take both, I;d sell Jaguar off to somone who could make something out of it, because that someone sure isn’t me. Not a lotta love for Jag, but I totally want the Land Rover line.
I’ve always wondered why Land Rover doesn’t sell their small pickup version of the Defender here in the States. There are a lot of Ford engines that would fit in it if emissions requirments are the problem. Seems to me that it sell in respectable numbers.
There was so much grumbling in Britain when the Yanks bought Jaguar and Land Rover. That’s all going to seem like the good old days when Tata writes a check for the two companies and then the (gasp!) Indians own the two venerable British auto companies. I think it’s hilarious.
If you’re going to bet on any of the bidders, I think the smart money has to be with Jac Nasser. I can’t see Tata coming away with the prize (if you can call Jaguar a prize) in this contest.
Jaguar is a brand in search of an identity at this point. Its still some brand identity left from it’s heyday, but that is ebbing away quickly. They need to either reinforce that one or get a new one. Like yesterday, they don’t have a moment to hesitate.