July 19th – deadline for Jaguar bids
The TimesOnLine and other business internet sites are reporting that the Ford Motor Company has set July 19th as a deadline for bids to purchase Jaguar and Land Rover from the company.
Though Ford has not publicly acknowledged that the two marques are for sale, it has hired three New York investment banking firms to assist it in valuing the two brands.
According to the Times report, Ford has been very limited in the nature and amount of financial information it has been willing to disclose to prospective buyers, and has also been limited in those possible purchasers with whom it has been willing to share that information. In light of that, any potential bids are merely a starting point for negotiations, as both sides would have to prove their bona fides to the other.
That said, however, the rumor mill has Cerebus, the recent purchaser of Chrysler, as one of the bidders. Others include Blackstone, the private equity firm that recently floated its own public offering (making a financial killing for its principals), Providence, Ripplewood Holdings, and One Equity.
One Equity is particularly interesting: it’s the private equity arm of investment bank J. P. Morgan. One of its senior partners is Jac Nasser. Nasser is the former CEO of Ford Motor Company who was bounced by the Ford family in large part because his purchase of Jaguar and Land Rover had generated huge losses for the company. Despite that history of failure, Nasser has somehow retained a reputation as a brilliant auto industry executive. At least this much might be said for him: if One Equity should end up buying Jaguar and Land Rover, he will have engineered one of the most interesting deals of modern business: getting Ford to overpay for two money losing companies, getting it to pay for all of the investment required to make those companies profitable, and then buying them both at a fire sale price because he milked so much cash out of Ford that it can no longer afford to hang in for the payoff.
Meantime, the British labor unions have weighed in.
The Transport and General Worker’s Union figures 19,000 jobs are at stake in this deal, and it wants to be sure that not a single one of them will be lost. Hence, it is insisting that any sale agreement promise that the purchaser will continue production at the current UK plants for five years and for ten years at the engine production facilities, among other items on its list of eight demands.
This underscores a core problem for any prospective purchaser.
Both Land Rover and Jaguar source their engines from Ford. Ford does not intend on selling the plants that produce those engines when it sells the two car lines. The plants produce engines for other Ford lines, with the relatively small production of engines for Jaguar and Land Rover being something of an afterthought, almost.
That means that the buyer of Jaguar and Land Rover is:
- Betting that Ford Motor Company won’t go bankrupt.
- Betting that Ford Motor Company will be able to deal with the notoriously fickle British labor unions.
- Counting on a supply of engines from a company over which it has no control.
Such a deal.