DealZone

Tata’s likely infusion into Jag, Rover, bad news for sellers

SWITZERLAND/Tata Motors, which bought Jaguar and Land Rover from Ford earlier this year, may now have to pump at least $1 billion into the brands to keep them alive. That’s bad news for U.S. automakers trying to sell brands.

While auto assets up for sale by U.S. automakers were expected to linger for a while, Tata’s rough road with Jag and Land Rover are likely to keep those assets on the block for much longer.

Tata has agreed to inject “tens of millions” of pounds into the company to tide it over while the government mulls a bailout,  media reports have said. This is in addition to “hundreds of millions” of working capital provided since Tata bought Jaguar Land Rover from Ford in March.

That’s a lot of cash for any automaker. And it’s a lot of cash for an Indian automaker, which makes most of its profit in Indian rupees.

And that’s bad news for U.S. automakers hoping to lure buyers — some from emerging markets — for various assets. As Detroit’s three surviving automakers seek interest for Volvo, Saab, Viper and Hummer, the most likely buyers are Asian automakers. But Tata has its hands full with the two brands it bought from Ford. And Mahindra & Mahindra, another Indian contender, is bound to be discouraged by Tata’s experience. Investment bankers have said that Chinese automakers were waiting on the sidelines to see how the Tata experience works out.

The Big Sale at Ford

Logos of the carmakers Jaguar and Land Rover are pictured during the first media day of the 78th Geneva Car Show at the Palexpo in Geneva

 Ford‘s soon-to-be-signed sale of Jaguar and Land Rover to Tata Motors could bring in as much as $2.65 billion, according to local TV, or $2 billion according to the FT. Though the stage appears to be set, a Tata Group spokesman told Reuters discussions were ongoing. Tata Motors, India’s top vehicle maker maker of trucks and busses, received union backing for the deal and was named the front-runner in January by Ford, which is seeking to shore up its balance sheet and reduce debt.

JPMorgan‘s revised takeover offer for Bear Stearns is a “high risk transaction,” Punk Ziegel analyst Richard Bove said after JPMorgan boosted its all-stock offer five-fold to about $10 a share. “What is most disturbing about this deal is that it uses a great deal of Morgan capital to buy a company that is losing market share, in a series of businesses that are declining in size, with a top management team that is best described as sclerotic,” the veteran bank watcher wrote in a note to clients. “Investors believe that JPMorgan is underbidding for Bear Stearns… I do not. … Bear Stearns is a deeply troubled company which would have no value if the Federal Reserve had not stepped in to bail it out.”

China’s state-owned aluminum giant Chinalco - which teamed up last month with Alcoa to buy a $14 billion stake in Rio Tinto - may spend more than $4 billion this year on acquisitions at home and abroad, according to the South China Morning Post. That’s no great pile of investment. BHP has bid $147 billion for Rio. Though the company did not specify targets, it said non-ferrous metals would be the main focus.