Buyout Shops Ready To Pounce For Jaguar

Private equity sponsors are being heavily courted to bid for Jaguar and Land Rover, Ford Motor Co.’s luxury car brands. Earlier this month, Ford appointed Goldman Sachs, HSBC and Morgan Stanley to find buyers for the combined Jaguar and Land Rover business, estimated to be worth about $8 billion.

The European auto sector has so far seen very little buyout activity, though Cerberus Capital Management’s acquisition of No. 3 United States automaker, the Chrysler division of German parent DaimlerChrysler, is seen as a precedent for future deals. Cerberus’s $7.4 billion play for Chrysler is set to be backed by a $15 billion debt package, and lenders appetite for what was previously seen as a highly toxic sector is said to be good.

Jaguar and Land Rover are part of Ford’s premium PAG group, which reported a pre-tax loss in 2006 of $327 million. Ford does not provide a breakdown for each brand, but while Land Rover makes a good profit, loss-making Jaguar has suffered in recent years. As a result, while it would be possible to add leverage to Land Rover, there would need to be some ring-fencing to protect lenders from Jaguar’s losses, according to bankers who have looked at the companies.

Early reports that U.K. private equity house Alchemy, which had previously bid unsuccessfully for Land Rover, would take part in an auction were quickly denied. David Richards, part of the consortium that bough Aston Martin from Ford for $924 million in March, has expressed an interest and could be part of a bid. Cerberus, of course, has also been mentioned as a potential player.

A combined Land Rover-Jaguar sale, however, will be of a different magnitude than the deal for high-end manufacturer Aston Martin, which was backed by a quietly syndicated loan.—International Financing Review