BMW should buy JLR, say an­a­lysts

The Times of India (New Delhi edition) - - Times Business -

We need to talk about Jaguar Land Rover. That’s the message from San­ford C Bern­stein an­a­lysts, who say BMW should buy the British lux­ury brand from In­dia’s Tata Mo­tors.

“BMW is over­cap­i­talised and awash with cash. It has run into the lim­its of growth for its prod­uct range and brand,” an­a­lysts in­clud­ing Max War­bur­ton wrote in a re­search note on Wed­nes­day. “JLR is se­verely chal­lenged, both op­er­a­tionally and fi­nan­cially, but could mas­sively lower both its fixed and vari­able costs un­der the wing of a big­ger part­ner.”

The sug­ges­tion comes as Tata Mo­tors’ losses mount, with a sales slow­down in China and Brexit adding to its woes. BMW is also nav­i­gat­ing trade ten­sions be­tween the US and China that have weighed on profit, and the un­re­solved po­lit­i­cal fu­ture of the UK, where it makes Mini and Rolls-Royce cars. Buy­ing JLR for 9 bil­lion pounds ($11.2 bil­lion) could add 20% to BMW’s earn­ings, ac­cord­ing to Bern­stein. It would also con­trib­ute al­most a quar­ter to BMW’s vol­umes, but “Tata would need to swal­low its pride to sell,” the an­a­lysts said. They also said the Ger­man au­tomaker would have to be less con­ser­va­tive.

Tata Mo­tors’ shares closed 0.5% on the BSE, while BMW rose 0.2% in Frank­furt.

A deal would be “emo­tion­ally com­plex” due to their for­mer re­la­tion­ship, when BMW owned Land Rover and the wider Rover group in the 1990s, War­bur­ton and his col­leagues wrote. “It was a trau­matic pe­riod for the Bavar­ian com­pany and there are ex­ec­u­tives in Mu­nich who are still emo­tion­ally scarred by the ex­pe­ri­ence.” Still, the logic for an ac­qui­si­tion is com­pelling, they said.

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