Monday, July 16, 2007

Up to six bids loom for Ford marque/Ford considers selling Volvo

Up to six bids loom for Ford marques
By Martin Arnold
Copyright The Financial Times Limited 2007
Published: July 19 2007 03:00 | Last updated: July 19 2007 03:00
Ford is expected to receive up to six indicative bids for Jaguar and Land Rover today, kicking off a surprisingly competitive auction of the UK luxury carmakers.

Cerberus Capital Management, Ripplewood Holdings and One Equity Partners are among private equity groups understood to be planning bids.

At least one trade buyer is thought to be planning an indicative bid. Hyundai of South Korea and Tata Motors of India are likely contenders while Renault Nissan of France is thought to have backed away.

Any trade buyer is thought to be interested in only one brand.

One Equity's partners include Jac Nasser. The former Ford chief executive established Ford's Premier Automotive Group, which owns the two British brands and Volvo.

The auction could move quickly. Ford hopes to selecttwo final bidders in the next couple of weeks to begin due diligence on Jaguar and Land Rover.

Ford is also considering a sale of Volvo, its third European car brand, to cut massive debts. But it is unlikely to make any decisions on the Swedish business until the UK assets are sold.

Ford would prefer to sell the two brands, which share many management functions, together but is prepared for separate sales.

The sale of Jaguar and Land Rover is likely to be controversial, especially given that private equity is the favourite. Buy-out groups have come under attack in the UK, where they are accused of cutting jobs, stripping assets and operating secretively.

Trade unions have insisted that Ford keep a stake in the companies and that any bidder keeps the three UK factories involved open.

The car sector has become particularly attractive to buy-out firms as it is one of the few areas where valuations are low. Average enterprise value-to-earnings multiples for automotive buy-outs fell from 6.2 in 2005 to 5 this year, while valuations for all takeovers rose from 8.2 to 8.4.

Buy-out firms already own automotive companies worth more than $50bn (£24bn), said Alix Partners, the restructuring firm. But most are partssuppliers rather than carmakers.

Private equity firms have moved up the supply chain recently to buy the carmakers themselves. Cerberus paid $7.4bn in May for DaimlerChrysler's US-based Chrysler business.

Sales at lossmaking Jaguar dropped 21 per cent in the six months to June compared with a year earlier. Land Rover sales were flat in that period.

The two together sell only 300,000 cars annually.

Alchemy Partners, which bid for Rover in the UK seven years ago, and Carlyle, which owns a string of auto suppliers, have ruled out making bids.

Ford considers selling Volvo
By Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: July 16 2007 03:00 | Last updated: July 16 2007 03:00

Ford Motor is considering the sale of its Volvo car division, a move that would mark the final dismemberment of its premium-car business outside North America.

The struggling Detroit-based carmaker said yesterday that it was not in talks with any other company about a sale of Volvo. But it added that "we are continuing to assess all our operations and looking at strategic options".

Ford has sold or is in the process of entertaining bids for the other three marques of itsluxury-car division, known as the Premier Automotive Group.

It disposed of Aston Martin this year and its financial advisers have set July 19 as a deadline for expressions of interest for Jaguar and Land Rover. Analysts at Merrill Lynch have estimated that Volvo will fetch about $8bn.

Ford bought Volvo in 1999 as part of an aggressive expansion strategy. The brand has a strong reputation for safety, but sales have stagnated in recent years - including a 3.6 per cent drop in 2006 to about 430,000 vehicles.

Volvo is seeking to regain traction with a flurry of new models, helping to boost sales in the final quarter of last year and early 2007. It has recently sought to expand in China, Russia and other emerging economies.

Ford lost $12.7bn last year and has borrowed to shore up liquidity in anticipation of a further cash drain this year and 2008.

The premier carmaking group reported a $327m pre-tax loss last year, but recovered to a $402m profit in the first quarter. Ford does not break out results for individual marques, but Volvo is widely assumed to be profitable. Second-quarter results are due to be published on July 26.

Ford officials ruled out a Volvo sale this year, but have recently taken a more ambivalent approach.

Frederik Arp, Volvo's chief executive, recently declinedto comment on industry speculation about a sale because "it'snot in the interest of Volvo car stakeholders, customers, dealers or anybody else, and [because]I don't own the business".

As Ford is retreating from the international luxury-car market, Lincoln, its domestic luxury brand, has shown signs of revival, with sales increases for nine consecutive months.

One person familiar with the bidding process for Jaguar and Land Rover said talks were still at an early stage.

Ford would prefer to sell the two brands - which share many common management functions - together, but it has made preparations to sell them separately. Goldman Sachs, Morgan Stanley and HSBC are advising Ford.


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