Daimler AG, the world’s second- largest maker of luxury cars, is selling its stake in Tata Motors Ltd. after more than five decades of ownership, according to a person familiar with the matter.
An investor is offering as many as 25.6 million shares, or a 5.3 percent holding, in India’s largest truck and bus maker, for 737.4 rupees to 761.3 rupees apiece in a block deal that is to be completed tomorrow, according to a sale document. The transaction could raise as much as 19.5 billion rupees ($428 million). Citigroup Inc. is managing the sale.
Daimler, based in Stuttgart, Germany, formed a partnership with Tata Motors in 1954 to make commercial vehicles. Mumbai- based Tata Motors, stock has increased more than six times since a record closing low of 126.20 rupees in November 2008. In the 12 months ended March 2009, Tata Motors had its first loss in at least seven years.
“The stake hasn’t taken Daimler anywhere in the last 40 years or so, and having cash these days is a luxury,” Arndt Ellinghorst, an analyst with Credit Suisse in London. Daimler, busy with new truck ventures in Russia and the search for a partner for small cars, may be looking to “streamline” its portfolio, he said.
Tata Motors climbed 0.4 percent to 797.65 rupees in Mumbai trading. News of the stake sale came after the market close. The sale price is as much as 7.6 percent less than today’s closing price.
Chennai Factory
Daimler fell 2 cents, or 0.1 percent, to 32.97 euros as of 2:16 p.m. on the Frankfurt exchange, giving the luxury-car maker a market value of 35 billion euros. Daimler owns 25.6 million shares of Tata, data compiled by Bloomberg show.
Debasis Ray, a spokesman for Tata Motors, and Daimler spokesman Florian Martens declined to comment.
The two companies will now compete against each other in the Indian market. Daimler is building a factory in Chennai, India, that will begin production in 2012. Tata’s luxury-vehicle division, Jaguar Land Rover Ltd., competes with Daimler’s Mercedes-Benz.
The Indian company hired Carl-Peter Forster, the former head of General Motors Co.’s European division, as CEO to help manage global operations after purchasing Jaguar Land Rover from Ford Motor Co. in 2008 for $2.5 billion.
Jaguar Land Rover reported its first quarterly profit since being bought out by Tata for the three months ended in December.
Daimler, which canceled its dividend after recording a 2.6 billion-euro net loss in 2009, slowed production to lower personnel expenses and reduce inventories to preserve cash. The measures helped the automaker boost cash and cash equivalents to 9.8 billion euros at the end of 2009 from 6.9 billion a year earlier.
The maker of Mercedes-Benz cars and trucks also increased and extended credit lines to double liquidity to 16.1 billion euros from 8 billion euros, according to Daimler’s annual report.
Source: Bloomberg