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SUBMITTED BY: Names: Aakansha Khanna, Anshul Garg, Japnit Walia, Karan Sabharwal, Ravneet Singh, Siddharth Anand, Supriya Bhatt.
Acquisition of Jaguar & Land Rover by Tata Motors Section: B
INTRODUCTION We have been learning about the companies coming together to form another company and companies taking over the existing companies to expand their business. With recession taking toll of many Indian businesses and the feeling of insecurity surging over our businessmen, it is not surprising when we hear about the immense numbers of corporate restructurings taking place, especially in the last couple of years. Several companies have been taken over and several have undergone internal restructuring, whereas certain companies in the same field of business have found it beneficial to merge together into one company. In this context, it would be essential for us to understand what corporate restructuring and mergers and acquisitions are all about. All our daily newspapers are filled with cases of mergers, acquisitions, spin-offs, tender offers, & other forms of corporate restructuring. Thus important issues both for business decision and public policy formulation have been raised. No firm is regarded safe from a takeover possibility. On the more positive side Mergers & Acquisitions may be critical for the healthy expansion and growth of the firm. Successful entry into new product and geographical markets may require Mergers & Acquisitions at some stage in the firm's development.
The objectives of our caselet can be described as:
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1. To understand the pros and cons of Mergers and Acquisitions. 2. To understand the legal formalities undertaken in the acquisition process.
WHAT IS LAW? Law denotes rules and principles either enforced by an authority or self imposed by the members of a society to control and regulate people’s behavior with a view to securing justice, peaceful living and social security. Mercantile law is that branch of law which comprises law concerning trade, industry and commerce.
INDIAN CONTRACT ACT, 1872 A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law. Section 2(h) defines a contract as an agreement enforceable by law. Contract= Agreement + Enforceability at law
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Section2 (e) defines every promise and every set of promise forming consideration for each other as an agreement. Agreement= Offer+ Acceptance And, Agreement=Social agreement + Legal agreement Offer Legal Lawful Competenc Free Legality Certainty Possibility and of Essenti Acceptance Relationsh yConsiderati Consent of performance Formaliti Capacity object al ip on es
Elemen ts of Contra ct
MERGER Merger is defined as combination of two or more companies into a single company where one survives and the others lose their corporate existence. The survivor acquires all the assets as well as liabilities of the merged company or companies. Generally, the surviving company is the buyer, which retains its identity, and the extinguished company is the seller.
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Merger is also defined as amalgamation. Merger is the fusion of two or more existing companies. All assets, liabilities and the stock of one company stand transferred to Transferee Company in consideration of payment in the form of: • • • •
Equity shares in the transferee company, Debentures in the transferee company, Cash, or A mix of the above modes.
ACQUISITON Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company. Methods of Acquisition: An acquisition may be affected by: (a) agreement with the persons holding majority interest in the company management like members of the board or major shareholders commanding majority of voting power; (b) purchase of shares in open market; (c) to make takeover offer to the general body of shareholders; (d) purchase of new shares by private treaty; Acquisition of share capital through the following forms of considerations viz. means of cash, issuance of loan capital, or insurance of share capital
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ACQUISITION PROCESS The acquisition process can be divided into a planning stage and an implementation stage. The planning stage consists of the development of the business and the acquisition plans. The implementation stage consists of the search, screening, contacting the target, negotiation, integration. Process of acquisition can be in the following steps: 1. Developing the business plan A merger or acquisition decision is a strategic choice. The acquisition strategy should fit the company’s strategic goals of increasing the cash flows and reduce risk. Business plan communicates a mission or a vision for the firm and a strategy for achieving that mission. Business plan consists of the following activities: •
Determining where to compete i.e. The industry or the market in which the firm desires to compete.
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Determining how to compete. An external analysis can be made to determine how the firm can most effectively compete in its chosen market.
•
Self assessment of the firm by conducting an internal analysis of the firm’s strengths and weaknesses relative to the competition.
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•
Defining the mission statement by summarizing where and how the firm has chosen to compete
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Setting objectives by developing competitive measures of performance.
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Selecting the most likely strategy to achieve the objectives within a reasonable time period subject to the constraints in the self assessment.
The strategic planning process identifies the company’s competitive position and sets objectives to exploit its relative strengths while minimizing the effects of its weaknesses.
1. The Search Process The search for the potential acquisition takes place in two stages:•
It involves establishing a primary screening process. The primary criteria based on which the search process is based include factors like the industry, size of the transaction and the geographic location. The size of the transaction is best defined in terms of the maximum purchase price of a firm is willing to pay.
•
This involves developing the search strategy. It uses computerized database and directory services to identify the prospective candidates.
The screening process The screening process starts with the reduction of the initial list of potential candidates identified by using the primary criteria such as the size and the type of industry. First contact It involves meeting the acquisition candidate and putting forward the proposal of acquisition. It depends on the size of the company and whether it is publicly or privately held.
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1. Preliminary legal documents • •
Confidentiality agreement Letter of intent
1. Negotiation Process consists of many activities conducted simultaneously by various members of the acquisition team. The actual purchase consideration is determined during this phase. Defining the purchase price: The purchase consideration can be defined in • • •
The total consideration Total purchase price The net purchase price
1. Structuring the deal It involves meeting the needs of both parties by dealing with issues of risk and reward by legal, tax and accounting structures.
Due diligence required by law •
According to Cadbury report, the due diligence report is required for acquisitions because the full board of directors of the purchasing company should review significant acquisitions.
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•
In India, a merchant banker has to conduct due diligence to ensure the acquirer’s financial position and chance of implementation of terms of merger condition by the parties by giving a due diligence certificate to the SEBI.
•
In a merger, both the parties will conduct due diligence. Due diligence can be conducted from different perspectives.
Financial – historical records, review of management and systems. Legal- various contractual acts in the country Commercial –market conditions Tax- existing tax levels, liabilities and arrangements. Management –mgmt quality, organizational structure
1. Closing the Deal Closing is the final legal procedure where the company changes hands. It consists of all necessary shareholder, regulatory and third party. All the necessary approvals are attained at this stage. Conditions for closing Certain pre conditions set in the definitive agreement have to meet before the close of the contract. The pre conditions include the assumption that the seller would abide by the representations and warranties and will live up to the obligations.
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Documents required completing the transaction of a merger or an acquisition is:• • • • • •
Loan agreements, trademarks and trade names Supplier and customer contracts Distributor and sales representative agreements Insurance policies and claim pending Articles of incorporation, bylaws and corporate seals. Employee incentive programs
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TATA GETS JAGUAR AND ROVER UNDER ITS PAW!
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ABSTRACT Creating history, India’s top corporate Tata’s on Wednesday acquired luxury auto brands—Jaguar and Land Rover—from Ford Motors for $ 2.3 billion, stamping their authority as a takeover tycoon. Beating compatriot Mahindra and Mahindra for the prestigious brands on 2 nd June 2008 announced the deal they signed with Ford, which on its part would chip in $600 million towards JLR’S pension plan. “We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business”, Group Chairman Ratan Tata said after making the deal public. Tata Motors' acquisition of two iconic British brands - Jaguar and Land Rover - was finally completed. Well, it is true that their immediate previous owners were American, but the flavour of the two companies continues to be very Brit. Tata has acquired the two companies for about half the price that Ford paid their original owners when the latter acquired them in 1989. Though that sounds like a good deal, it is not going to be all rosy for Tata Motors after the acquisition. The real work starts now for this global Indian, trying to pull together the two brands and making them more profitable while still being weighed down by their historical issues. Jaguar and Land Rover are both special, super premium brands that have a huge fan following. The ownership of the two brands has changed hands, but the brands themselves will remain untarnished. And Tata Motors itself has just become more global. Calls to separate the passenger car business from the rest of the company will only get shriller now. Tata Motors is now officially the proud parent of the Jaguar, and its sister Land Rover. The deal is a fulfillment of Mr. Tata’s personal vision and is intended to catapult Tata
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Motors, the owner of the cute li’l Nano, into the global big league of auto majors. It will also reinforce the global perception of India Inc as a leader in international business, and not just in IT. Yet, the final lap of Group Tata’s long-drawn-out bid to acquire Jaguar-Land Rover (JLR) from Ford for $2.3 billion in cash was a bit of an anti-climax. Compared with the Corus deal, this was almost hush-hush. In open-for-business Britain, the headlines are already calling the Tata’s the ‘Corus owners’, and not the ‘Indian auto company’. The key challenge for the new owner of Jaguar and Land Rover will be to grow and maintain sales of the two brands in a global downturn and credit crunch. Tata Motors will have to commit significant managerial and financial resources to engineer a turnaround. It will have to significantly step up its R&D budget as well as increase operating expenditure and capital expenditure to meet JLR’s requirements. Auto analysts tracking the development say the acquisition was just the first step; the real challenge lies in running JLR. The acquisition cost of $2.3 billion is financed by a bridge loan, which will be raised through a syndicate of banks. The bridge money will be replaced by a combination of long-term debt and equity at an appropriate time. The company will raise funds to finance its equity contribution by selling a portion of its stake in some of its subsidiaries in the next few months. Largest cross-border auto takeover SOURCES indicate that initially two joint ventures with Hitachi for axles and transmission—HVAL and HVTL—and auto component maker TACO are some of the subsidiary companies Tata Motors is looking to divest. Citigroup and JPMorgan are the lead advisors to the deal, which is the largest crossborder auto acquisition by an Indian company. The deal is expected to close by the end of June 2008, subject to regulatory approvals and the achievement of financial closure. The transaction is significant for a number of reasons. Coming as it does amidst a global freeze in credit markets; it shows that top-notch Indian companies have the ability to raise large amounts of money at reasonably low rates of interest. Besides the two US banks, the bridge loan is being underwritten by a consortium of eight banks — State Bank of India, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, ING, Mizuho and Standard Chartered. The loan has been structured in the form of step-up financing: for the first six months, the interest charge would be Libor (London Inter-
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Bank Offered Rate) plus 70 basis points and for the next six months, it would be 140 basis points over the benchmark rate. The six-month Libor is currently at 2.63%. The bridge loan is being raised by a special purpose vehicle — Tata Motors UK, which will own these two brands, banking sources said. Tata Motors UK is 100% owned by Tata Motors.
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THE COMPANY PROFILE: TATA
Tata Motors Limited is India’s largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8 billion) in 2007-08. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer.
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The company’s 23,000 employees are guided by the vision to be “best in the manner in which we operate best in the products we deliver and best in our value system and ethics.” Established in 1945, Tata Motors’ presence indeed cuts across the length and breadth of India. Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company is establishing two new plants at Dharwad (Karnataka) and Sanand (Gujarat). The company’s dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India. Tata Motors, the first company from India’s engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in 2008. In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea’s second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, with an option to acquire the remaining stake as well. Hispano’s presence is being expanded in other markets. In 2006, it formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company’s pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production of the Xenon
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pickup truck, with the Xenon having been launched in Thailand at the Bangkok Motor Show 2008. Tata Motors is also expanding its international footprint, established through exports since 1961. The company’s commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal. The foundation of the company’s growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. With over 2,500 engineers and scientists, the company’s Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, in India, and in South Korea, Spain, and the UK. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata Indica, India’s first fully indigenous passenger car. Within two years of launch, Tata Indica became India’s largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India’s first indigenously developed mini-truck In January 2008, Tata Motors unveiled its People’s Car, the Tata Nano, which India and the world have been looking forward to. A development, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families. When launched in India later in 2008, the car will be available in both standard and deluxe versions. The standard version has been priced at Rs.100,000 (excluding VAT and transportation cost). Designed with a family in mind, it has a roomy passenger compartment with generous leg space and head room. It can comfortably seat four persons. Its mono-volume design will set a new benchmark among small cars. Its safety performance exceeds regulatory requirements in India. Its tailpipe emission performance too exceeds regulatory requirements. In terms of overall pollutants, it has a lower pollution level than two-wheelers being manufactured in India today. The lean design strategy has helped minimize weight, which helps maximize performance per unit of energy consumed and delivers high fuel efficiency. The high fuel efficiency also ensures that
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the car has low carbon dioxide emissions, thereby providing the twin benefits of an affordable transportation solution with a low carbon footprint. The years to come will see the introduction of several other innovative vehicles, all rooted in emerging customer needs. Besides product development, R&D is also focusing on environment-friendly technologies in emissions and alternative fuels. Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations. True to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate Social Responsibility. It is a signatory to the United Nations Global Compact, and is engaged in community and social initiatives on labor and environment standards in compliance with the principles of the Global Compact. In accordance with this, it plays an active role in community development, serving rural communities adjacent to its manufacturing locations. With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.
Tata Code of Conduct This comprehensive document serves as the ethical road map for Tata employees and companies, and provides the guidelines by which the group conducts its businesses.
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Clause:1 National interest The Tata group is committed to benefit the economic development of the countries in which it operates. No Tata company shall undertake any project or activity to the detriment of the wider interests of the communities in which it operates. A Tata company’s management practices and business conduct shall benefit the country, localities and communities in which it operates, to the extent possible and affordable, and shall be in accordance with the laws of the land. A Tata company, in the course of its business activities, shall respect the culture, customs and traditions of each country and region in which it operates. It shall conform to trade procedures, including licensing, documentation and other necessary formalities, as applicable. Clause:2 Financial reporting and records A Tata company shall prepare and maintain its accounts fairly and accurately and in accordance with the accounting and financial reporting standards which represent the generally accepted guidelines, principles, standards, laws and regulations of the country in which the company conducts its business affairs. Internal accounting and audit procedures shall reflect, fairly and accurately, all of the company’s business transactions and disposition of assets, and shall have internal controls to provide assurance to the company’s board and shareholders that the transactions are accurate and legitimate. All required information shall be accessible to company auditors and other authorized parties and government agencies. There shall be no willful omissions of any company transactions from the books and records, no advance-income recognition and no hidden bank account and funds. Any willful, material misrepresentation of and / or misinformation on the financial accounts and reports shall be regarded as a violation of the Code, apart from inviting appropriate civil or criminal action under the relevant laws. No employee shall make, authorize, abet or collude in an improper payment, unlawful commission or bribing.
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Clause:3 Competition A Tata company shall fully support the development and operation of competitive open markets and shall promote the liberalization of trade and investment in each country and market in which it operates. Specifically, no Tata company or employee shall engage in restrictive trade practices, abuse of market dominance or similar unfair trade activities. A Tata company or employee shall market the company’s products and services on their own merits and shall not make unfair and misleading statements about competitors’ products and services. Any collection of competitive information shall be made only in the normal course of business and shall be obtained only through legally permitted sources and means. Clause:4 Equal opportunities employer A Tata company shall provide equal opportunities to all its employees and all qualified applicants for employment without regard to their race, caste, religion, color, ancestry, marital status, gender, sexual orientation, age, nationality, ethnic origin or disability. Human resource policies shall promote diversity and equality in the workplace, as well as compliance with all local labour laws, while encouraging the adoption of international best practices. Employees of a Tata company shall be treated with dignity and in accordance with the Tata policy of maintaining a work environment free of all forms of harassment, whether physical, verbal or psychological. Employee policies and practices shall be administered in a manner consistent with applicable laws and other provisions of this Code, respect for the right to privacy and the right to be heard, and that in all matters equal opportunity is provided to those eligible and decisions are based on merit.
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Clause:5 Gifts and donations A Tata company and its employees shall neither receive nor offer or make, directly or indirectly, any illegal payments, remuneration, gifts, donations or comparable benefits that are intended, or perceived, to obtain uncompetitive favors for the conduct of its business. The company shall cooperate with governmental authorities in efforts to eliminate all forms of bribery, fraud and corruption. However, a Tata company and its employees may, with full disclosure, accept and offer nominal gifts, provided such gifts are customarily given and are of a commemorative nature. Each company shall have a policy to clarify its rules and regulations on gifts and entertainment, to be used for the guidance of its employees. Clause:6 Government agencies A Tata company and its employees shall not, unless mandated under applicable laws, offer or give any company funds or property as donation to any government agency or its representative, directly or through intermediaries, in order to obtain any favourable performance of official duties. A Tata company shall comply with government procurement regulations and shall be transparent in all its dealings with government agencies. Clause: 7 Political non-alignment A Tata company shall be committed to and support the constitution and governance systems of the country in which it operates. A Tata company shall not support any specific political party or candidate for political office. The company’s conduct shall preclude any activity that could be interpreted as mutual dependence / favour with any political body or person, and shall not offer or give any company funds or property as donations to any political party, candidate or campaign.
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Clause:8 Health, safety and environment A Tata company shall strive to provide a safe, healthy, clean and ergonomic working environment for its people. It shall prevent the wasteful use of natural resources and be committed to improving the environment, particularly with regard to the emission of greenhouse gases, and shall endeavour to offset the effect of climate change in all spheres of its activities. A Tata company, in the process of production and sale of its products and services, shall strive for economic, social and environmental sustainability. Clause:9 Quality of products and services A Tata company shall be committed to supply goods and services of world class quality standards, backed by after-sales services consistent with the requirements of its customers, while striving for their total satisfaction. The quality standards of the company’s goods and services shall meet applicable national and international standards. A Tata company shall display adequate health and safety labels, caveats and other necessary information on its product packaging. Clause:10 Corporate citizenship A Tata company shall be committed to good corporate citizenship, not only in the compliance of all relevant laws and regulations but also by actively assisting in the improvement of quality of life of the people in the communities in which it operates. The company shall encourage volunteering by its employees and collaboration with community groups.
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Tata companies are also encouraged to develop systematic processes and conduct management reviews, as stated in the Tata ‘corporate sustainability protocol’, from time to time so as to set strategic direction for social development activity. The company shall not treat these activities as optional, but should strive to incorporate them as an integral part of its business plan. Clause:11 Cooperation of Tata companies A Tata company shall cooperate with other Tata companies including applicable joint ventures, by sharing knowledge and physical, human and management resources, and by making efforts to resolve disputes amicably, as long as this does not adversely affect its business interests and shareholder value. In the procurement of products and services, a Tata company shall give preference to other Tata companies, as long as they can provide these on competitive terms relative to third parties. Clause:12 Public representation of the company and the group The Tata group honours the information requirements of the public and its stakeholders. In all its public appearances, with respect to disclosing company and business information to public constituencies such as the media, the financial community, employees, shareholders, agents, franchisees, dealers, distributors and importers, a Tata company or the Tata group shall be represented only by specifically authorised directors and employees. It shall be the sole responsibility of these authorised representatives to disclose information about the company or the group. Clause:13 Third party representation Parties which have business dealings with the Tata group but are not members of the group, such as consultants, agents, sales representatives, distributors, channel
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partners, contractors and suppliers, shall not be authorised to represent a Tata company without the written permission of the Tata company, and / or if their business conduct and ethics are known to be inconsistent with the Code. Third parties and their employees are expected to abide by the Code in their interaction with, and on behalf of, a Tata company. Tata companies are encouraged to sign a nondisclosure agreement with third parties to support confidentiality of information. Clause:14 Use of the Tata brand The use of the Tata name and trademark shall be governed by manuals, codes and agreements to be issued by Tata Sons. The use of the Tata brand is defined in and regulated by the Tata Brand Equity and Business Promotion Agreement. No third party or joint venture shall use the Tata brand to further its interests without specific authorisation. Clause:15 Group policies A Tata company shall recommend to its board of directors the adoption of policies and guidelines periodically formulated by Tata Sons. Clause:16 Shareholders A Tata company shall be committed to enhancing shareholder value and complying with all regulations and laws that govern shareholder rights. The board of directors of a Tata company shall duly and fairly inform its shareholders about all relevant aspects of the company’s business, and disclose such information in accordance with relevant regulations and agreements. Clause:17 Ethical conduct
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Every employee of a Tata company, including full-time directors and the chief executive, shall exhibit culturally appropriate deportment in the countries they operate in, and deal on behalf of the company with professionalism, honesty and integrity, while conforming to high moral and ethical standards. Such conduct shall be fair and transparent and be perceived to be so by third parties. Every employee of a Tata company shall preserve the human rights of every individual and the community, and shall strive to honour commitments. Every employee shall be responsible for the implementation of and compliance with the Code in his / her environment. Failure to adhere to the Code could attract severe consequences, including termination of employment. Clause:18 Regulatory compliance Employees of a Tata company, in their business conduct, shall comply with all applicable laws and regulations, in letter and spirit, in all the territories in which they operate. If the ethical and professional standards of applicable laws and regulations are below that of the Code, then the standards of the Code shall prevail. Clause:19 Concurrent employment Consistent with applicable laws, an employee of a Tata company shall not, without the requisite, officially written approval of the company, accept employment or a position of responsibility (such as a consultant or a director) with any other company, nor provide freelance services to anyone, with or without remuneration. In the case of a full-time director or the chief executive, such approval must be obtained from the board of directors of the company. Clause:20 Conflict of interest An employee or director of a Tata company shall always act in the interest of the
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company, and ensure that any business or personal association which he / she may have does not involve a conflict of interest with the operations of the company and his / her role therein. Independent directors of a Tata company shall comply with applicable laws and regulations of all the relevant regulatory and other authorities. As good governance practice they shall safeguard the confidentiality of all information received by them by virtue of their position, but they need not be bound by all other conflicts that are applicable to employees or executive directors, as indicated below. An employee, including the executive director (other than independent director) of a Tata company, shall not accept a position of responsibility in any other non-Tata company or not-for-profit organisation without specific sanction. The above shall not apply to (whether for remuneration or otherwise): a) Nominations to the boards of Tata companies, joint ventures or associate companies. b) Memberships / positions of responsibility in educational / professional bodies, wherein such association will benefit the employee / Tata company. c) Nominations / memberships in government committees / bodies or organizations. d) Exceptional circumstances, as determined by the competent authority. Competent authority, in the case of all employees, shall be the chief executive, who in turn shall report such exceptional cases to the board of directors on a quarterly basis. In case of the chief executive and executive directors, the Group Corporate Centre shall be the competent authority. An employee or a director of a Tata company shall not engage in any business, relationship or activity which might conflict with the interest of his / her company or the Tata group. A conflict of interest, actual or potential, may arise where, directly or indirectly… a) An employee of a Tata company engages in a business, relationship or activity with anyone who is party to a transaction with his / her company.
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b) An employee is in a position to derive an improper benefit, personally or to any of his / her relatives, by making or influencing decisions relating to any transaction. c) An independent judgement of the company’s or group’s best interest cannot be exercised. The main areas of such actual or potential conflicts of interest shall include the following: a) An employee or a full-time director of a Tata company conducting business on behalf of his / her company or being in a position to influence a decision with regard to his / her company’s business with a supplier or customer where his / her relative is a principal officer or representative, resulting in a benefit to him / her or his / her relative. b) Award of benefits such as increase in salary or other remuneration, posting, promotion or recruitment of a relative of an employee of a Tata company, where such an individual is in a position to influence decisions with regard to such benefits. c) The interest of the company or the group can be compromised or defeated. Notwithstanding such or any other instance of conflict of interest that exist due to historical reasons, adequate and full disclosure by interested employees shall be made to the company’s management. It is also incumbent upon every employee to make a full disclosure of any interest which the employee or the employee’s immediate family, including parents, spouse and children, may have in a family business or a company or firm that is a competitor, supplier, customer or distributor of or has other business dealings with his / her company. Upon a decision being taken in the matter, the employee concerned shall be required to take necessary action, as advised, to resolve / avoid the conflict. If an employee fails to make the required disclosure and the management of its own accord becomes aware of an instance of conflict of interest that ought to have been disclosed by the employee, the management shall take a serious view of the matter and consider suitable disciplinary action against the employee.
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Clause:21 Securities transactions and confidential information An employee of a Tata company and his / her immediate family shall not derive any benefit or counsel, or assist others to derive any benefit, from access to and possession of information about the company or group or its clients or suppliers that is not in the public domain and, thus, constitutes unpublished, price-sensitive insider information. An employee of a Tata company shall not use or proliferate information that is not available to the investing public, and which therefore constitutes insider information, for making or giving advice on investment decisions about the securities of the respective Tata company, group, client or supplier on which such insider information has been obtained. Such insider information might include (without limitation) the following: •
Acquisition and divestiture of businesses or business units.
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Financial information such as profits, earnings and dividends.
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Announcement of new product introductions or developments.
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Asset revaluations.
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Investment decisions / plans.
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Restructuring plans.
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Major supply and delivery agreements.
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Raising of finances.
An employee of a Tata company shall also respect and observe the confidentiality of information pertaining to other companies, their patents, intellectual property rights, trademarks and inventions; and strictly observe a practice of non-disclosure. Clause:22 Protecting company assets The assets of a Tata company shall not be misused; they shall be employed primarily
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and judiciously for the purpose of conducting the business for which they are duly authorized. These include tangible assets such as equipment and machinery, systems, facilities, materials and resources, as well as intangible assets such as information technology and systems, proprietary information, intellectual property, and relationships with customers and suppliers. Clause: 23 Citizenship The involvement of a Tata employee in civic or public affairs shall be with express approval from the chief executive of his / her company, subject to this involvement having no adverse impact on the business affairs of the company or the Tata group. Clause:24 Integrity of data furnished Every employee of a Tata company shall ensure, at all times, the integrity of data or information furnished by him/her to the company. He/she shall be entirely responsible in ensuring that the confidentiality of all data is retained and in no circumstance transferred to any outside person/party in the course of normal operations without express guidelines from or, the approval of the management. Clause:25 Reporting concerns Every employee of a Tata company shall promptly report to the management, and / or third-party ethics helpline, when she / he becomes aware of any actual or possible violation of the Code or an event of misconduct, act of misdemeanour or act not in the company’s interest. Such reporting shall be made available to suppliers and partners, too. Any Tata employee can choose to make a protected disclosure under the whistleblower policy of the company, providing for reporting to the chairperson of the audit committee or the board of directors or specified authority. Such a protected disclosure shall be
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forwarded, when there is reasonable evidence to conclude that a violation is possible or has taken place, with a covering letter, which shall bear the identity of the whistleblower. The company shall ensure protection to the whistleblower and any attempts to intimidate him / her would be treated as a violation of the Code.
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The TATA - Values and purpose Purpose
At the Tata group our purpose is to improve the quality of life of the communities we serve. We do this through leadership in sectors of economic significance, to which the group brings a unique set of capabilities. This requires us to grow aggressively in focused areas of business. Our heritage of returning to society what we earn evokes trust among consumers, employees, shareholders and the community. This heritage is being continuously enriched by the formalization of the high standards of behavior expected from our employees and companies. The Tata name is a unique asset representing leadership with trust. Leveraging this asset to enhance group synergy and becoming globally competitive is our chosen route to sustained growth and long-term success.
Core values
The Tata group has always been a values-driven organisation. These values continue to direct the group's growth and businesses. The five core Tata values underpinning the way we do business are: •
Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny.
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•
Understanding: We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for the benefit of the communities we serve.
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Excellence: We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide.
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Unity: We must work cohesively with our colleagues across the group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation.
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Responsibility: We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.
Company profile: The Ford Motor Company (NYSE: F) is an American multinational corporation and the world's fourth largest automaker based on worldwide vehicle sales, following Toyota, General Motors, and Volkswagen. Based in Dearborn, Michigan, a suburb of Detroit,
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the automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford, Lincoln, and Mercury brands, Ford also owns Volvo Cars of Sweden, and a small stake in Mazda of Japan and Aston Martin of England. Ford's former UK subsidiaries Jaguar and Land Rover were sold to Tata Motors of India in March 2008. In 2007, Ford fell from the second-ranked automaker to the third-ranked automaker in US sales for the first time in 56 years, behind General Motors and Toyota. Based on 2007 global sales, Ford fell to the fourth-ranked spot behind Volkswagen. Ford is the seventh-ranked overall American-based company in the 2007 Fortune 500 list, based on global revenues in 2007 of $172.5 billion. In 2007, Ford produced 6.553 million automobiles and employed about 245,000 employees at around 100 plants and facilities worldwide. Also in 2007, Ford received more initial quality survey awards from J. D. Power and Associates than any other automaker. Five of Ford's vehicles ranked at the top of their categories and fourteen vehicles ranked in the top three. Ford introduced methods for large-scale manufacturing of cars and large-scale management of an industrial workforce using elaborately engineered manufacturing sequences typified by moving assembly lines. Henry Ford's methods came to be known around the world as Fordism by 1914.
Corporate governance: Members of the board as of early 2007 are: Chief Sir John Bond, Richard Manoogian, Stephen Butler, Ellen Marram, Kimberly Casiano, Alan Mulally (President and CEO), Edsel Ford II, Homer Neal, William Clay Ford Jr., Jorma Ollila, Irvine Hockaday Jr., John L. Thornton and William Clay Ford (Director Emeritus).[7] The main corporate officers are: Lewis Booth (Executive Vice President, Chairman (PAG) and Ford of Europe), Mark Fields (Executive Vice President, President of The Americas), Donat Leclair (Executive Vice President and CFO), Mark A. Schulz (Executive Vice President, President of International Operations) and Michael E.
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Bannister (Group Vice President; Chairman & CEO Ford Motor Credit). Paul Mascarenas (Vice President of Engineering, the Americas Product Development).
Our Progress
We get it. We need a new way of doing business. You'll be glad to know Ford has been making great progress … we're sure you will agree.
Ford Motor Company, Honda Motors and Toyota Motors quality ratings are in a dead heat. Our cars, trucks and SUVs deliver fuel economy that's competitive with that of all other automakers.
EVENTS OF THE TATA-FORD DEAL
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1. FORD STARTS FACING PROBLEM WITH PENSION COSTS AND FALLING SALES IN NORTH AMERICA. Ford has been forced to sell two company’s based at Solihill and Castle Bromwich in the West Midlands and Halewood on Merseyside in order to concentrate on it’s lossmaking core US car business, which it hopes to turn around in the next two years. The largest loss of a $127 billion, overseen by Allan Mullay, who took over as a Chief Executive Officer in the same year, decided to sell its iconic Aston Martin Brand to a U.K based investment consortium in a deal worth $955.2 million in 2007. Ford mission became to integrate the Ford brand globally, and create a strong Ford motor company that delivers profitable growth to all. 2. FORD INDICATES THAT IT MIGHT LOOK FOR BUYERS FOR JAGUAR AND LAND ROVER MARQUES After the losses drained out cash and resources out of the Ford Company, Ford Motor gave a lucid indication for buyers of its two other brands- Jaguar and Land Rover, as luxury car sales went down across the globe. Jaguar sales dropped 33% in the US and Europe in the first two months of the year while Land Rover sales fell 13% in the US and 7.7% in Europe during the period. Ford bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000. But it has been struggling and wants to focus on its main brands. It has now sold the marques for less than what it paid then. 3. TATA CONFIRMS THE NEWS TO PARTICIPATE IN THE BID The head of India's Tata conglomerate confirmed Friday that his group was interested in bidding for luxury UK car brands Jaguar and Land Rover, in an interview with an Indian news channel. Tata Motors, India's biggest car company, has appointed advisors to evaluate a bid and signed a confidentiality agreement with Ford to access financial details of the two brands which have a combined British workforce of 19,000, the Business Standard daily quoted unnamed sources as saying last month. The move would be in keeping with Tata group's growing appetite for overseas acquisitions.
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4. MAHINDRA-MAHINDRA FAILED TO MAKE IN TO BID Mahindra & Mahindra has pulled out of the race to acquire iconic British brands Jaguar and Land Rover, which have been put on the block by Ford, citing complexities in the way the deal was structured. The development strengthened the case for Tata Motors, which is now pitted against private equity firm One Equity Partners that has roped in former Ford boss Jacques Nasser as an advisor. Sources close to the negotiations said M&M — though a serious contender in the beginning — decided against pursuing the deal as there were concerns related to Intellectual Property Rights (IPR) associated with the two brands. "The whole deal was considered to be very complex, prompting the company not to pursue it," a source said. M&M thought that it would have to go back to Ford on many crucial issues related to use of technology even after bagging the two brands. Crucial IPRs related to the brands are locked in with the US auto major, making it difficult for the eventual winner to "derive full benefits unhindered and Ford's continuing involvement was a crucial concern". 5. FORD ANNOUNCES TATA AS “PREFERRED BUYER”. On 1 January 2008, Ford made a formal announcement which declared Tata as the preferred bidder. Tata Motors also received endorsements from the Transport And General Worker's Union (TGWU)-Amicus combine as well as from Ford. According to the rules of the auction process, this announcement would not automatically disqualify any other potential suitor. However, Ford (as well as representatives of Unite) would now be able to enter into more focused and detailed discussions with Tata to iron out issues ranging from labour concerns (job security and pensions), technology (IT systems and engine production) and intellectual property as well as the final sale price. Ford would also open its books for a more comprehensive diligence by Tata. On 18 March 2008, Reuters reported that American bankers Citigroup and JP Morgan shall be due underwriting a loan of USD 3 billion in order to finance the deal.
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6. EUROPEAN COMMISION CLEARS ACQUISITION OF JAGUAR AND LAND ROVER BY INDIAN COMPANY, TATA MOTORS. On 26th April 2008,The European Commission (EC), the executive panel of the 27member European Union, cleared the acquisition of the Jaguar and Land Rover business (JLR) of US-based Ford Motor Company by India's Tata Motors Ltd The EC announced in Brussels. that it has granted clearance under the EU Merger Regulation Procedure.
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THE DEAL
The definitive agreement was agreed by Tata Motor’s Ltd., on 26th March 2008 to acquire luxury British marques, Jaguar and Land Rover. The all-cash deal, which was agreed in March, includes all necessary intellectual property rights, manufacturing plants, two advanced design centers in the UK and a worldwide network of sales companies. Included in the deal were the rights to three
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other British brands, Jaguar's own Daimler, as well as two dormant brands Lanchester and Rover. On 2 June 2008 the sale to Tata was completed by both parties
TRANSITION SUPPORT Other areas of transition support from Ford include IT, accounting and access to test facilities. The companies will also cooperate in areas such as design and development through sharing of platforms and joint development of hybrid technologies and power train engineering, Tata Motors said.
TIMELINE OF THE HISTORIC DEAL 2005
Ford starts facing problems with pension and health care costs and falling sales in North America. Starts reporting losses from the second quarter -
2006
Alan Mullaly takes over as chief executive and oversees a $12.7 billion loss, the largest in the company's history Ford decides to sell its Aston Martin brand -
May, 2007
Ford closes the Aston Martin sale for $848 million
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June, 2007
Ford indicates that it might look at buyers for Jaguar and Land Rover marques -
July, 2007
Ford receives preliminary bids for the brands. Reports say that TPG Inc., Cerberus Capital Management Lp. Ripplewood Holdings, One Equity Partners Llc are in the fray, along with Tata Motors Ltd and Mahindra & Mahindra -
August, 2007
Ratan Tata, chairman of Tata Motors Ltd, confirms that his company was bidding for the premium car Makers -
November, 2007
Investment bankers say that Apollo Alternative Assets is teaming up with Mahindra & Mahindra Reports say that Ford has shortlisted three bidders—Tata, Mahindra and One Equity—for further negotiations with its trade unions Unite, the trade union representing Land Rover and Jaguar workers, says it supports Tata Motors' bid -
December, 2007
The three bidders submit their bid -
January 2008
,
Ford names Tata as "preferred buyer" -
March, 2008
Tata, Ford sign deal
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June, 2008
Deal finally completed by both the parties.
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STUDENT’S ANALYSIS •
OFFER AND ACCEPTANCE Offer and acceptance: there must be two parties to an agreement, i.e., one party making the offer and the other party accepting it. The terms of the offer must be definite and the acceptance of the offer must be absolute and unconditional. The acceptance must also be according to the mode prescribed and must be communicated to the offeror.
The deal was offered by Tata and finally accepted on 2nd June 2008 by William Clay Ford (Chairman of Ford) and Allan Mulally (CEO of Ford) OFFER BY TATA à ACCEPTANCE BY FORD •
LEGAL RELATIONSHIP Intention to create legal relationship: When the two parties enter into an agreement, there intention must be to create a legal relationship between them. If there is no such intention on the part of the parties, there is no contract between them.
Both the parties have the intention to create legal Relationship between them and were agreed to legalize the deal in written
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•
LAWFUL CONSIDERATION 1. Lawful consideration: An agreement to be enforceable by law must be supported by consideration. ‘Consideration’ means an advantage or benefit moving from one party to another. It is the essence of a bargain. In simple words, it means ‘something in return’. The agreement is legally enforceable only when both the parties give something and get something in return. Consideration need not necessarily be in cash or kind. It may be an act, abstinence, or promise to do or not to do something. It may be past, present or future. But it must be real and lawful.
Consideration is lawful in the deal. Mr. Ratan Tata (Chairman of Tata) gets the Ford Company as his consideration.
•
CAPACITY OR COMPETENCY OF PARTIES Capacity of parties- competency: The parties to the agreement must be capable of entering into a valid contract. Every person is competent to contract if he (a) is the age of majority, (b) is of sound mind, and (c) is not disqualified from contracting by any law to which he is subject.
There are three conditions that are required for a party to become competent to contract were fulfilled:-Both the parties attains the age of majority at the time of contract. -Both the parties are of sound mind -Both Tata and Ford were not disqualified by any law from signing any contract.
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•
FREE CONSENT Free and genuine consent: It is essential to the creation of every contract that there must be free and genuine consent of the parties to the agreement. The consent of the parties is said to be free when they are of the same mind on all the material terms of the contract. The parties are said to be of the same mind when they agree about the subject matter of the contract in the same sense and at the same time. There is absence of free consent if the agreement is induced by coercion, undue influence, fraud, misinterpretation, etc.
In this case the consent of both the parties are free i.e. It is not caused by• Coercion • Undue Influence • Fraud • Misrepresentation • Mistake
Thus the contract is genuine.
•
LEGALITY OF OBJECT
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Lawful object: The object of the agreement must be lawful. In other words, it means that the object must not be (a) illegal, (b) immoral, or (c) opposed to public policy. If an agreement suffers from any legal flaw, it would not be enforceable by law. In Tata Ford deal nothing was illegal, immoral or opposed to public policy hence legality of object criteria also got fulfilled. •
POSSIBILITY OF PERFORMANCE Certainty and possibility of performance: The agreement must be certain and not vague or indefinite. If it is vague and it is not possible to ascertain its meaning, it cannot be enforced. The term of the agreement must also be such as are capable of performance. Agreement to do an act impossible in itself cannot be enforced.
In this deal both the parties were perform there respective promises so the deal is successful. •
LEGAL FORMALITIES Legal formalities: A contract may be made by words spoken or written. As regards the legal effects, there is no difference between a contract by writing and a contract made by word of mouth. It is in the interest of the parties that the contract should be in the writing. There are some other formalities also which have to be complied with in order to make an agreement legally enforceable. In some cases, the document in which the contract is incorporated is to be stamped. In some other cases, a contract, besides being a written one, has to be registered. Thus, where there is a statutory requirement that a contract should be made in writing or should be made in the presence of witnesses or registered, the required statutory formalities must be compiled with.
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In this deal all the legal formalities like registration etc. are fulfilled hence the deal is successful. Thus, all the elements which are essential for an agreement to become a contract are present.
Thus Contract is a Valid Contract
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