Ford to Buy Jaguar for $2.38 Billion

NEW YORK TIMES
By STEVEN PROKESCH, Special to The New York Times

In a deal that reflects the continuing consolidation of the world auto industry and the eagerness of big car makers to acquire prestigious brands, the Ford Motor Company announced today that it plans to buy Jaguar P.L.C. for a total of nearly $2.38 billion.

The friendly deal ends several weeks of jockeying to link up with the British luxury car maker between Detroit's two largest producers, Ford and the General Motors Corporation. G.M. had been negotiating to buy a large stake in Jaguar, an option the British company's chairman, Sir John Egan, a former G.M. executive in Europe, preferred because the proposed purchase stopped short of a takeover and thus would have insured Jaguar's independence. Jaguar and G.M. had been discussing a linkup for roughly nine months. Effect of British Ruling

But the British car maker's independence seemed doomed when the British Government, in keeping with its free-market leanings, declared last Tuesday that it was willing to lift a state restriction that could be used to bar another company from owning more than 15 percent of Jaguar until the end of 1990. Thus the favored car of British executives and Cabinet ministers, including Prime Minister Margaret Thatcher, was all but certain to fall into foreign hands.

The Ford-Jaguar linkup is the most significant of a handful of purchases and stake holdings in European luxury and sports-car makers by Detroit producers. Smaller moves during the past few years include G.M. linking up with Group Lotus, Ford buying 75 percent of Aston Martin Lagonda, and Chrysler picking up Maserati and Lamborghini. Until now, the targets have been mostly tiny high-performance producers.

Increased competition from the Japanese moving into the luxury-car sector, the high cost of developing new models, and a downturn in the crucial American market have made it increasingly difficult for smaller car makers like Jaguar to go it alone. Others, such as Saab-Scania A.B. and Volvo A.B., are scrambling to find big well-heeled partners. Unusual Statement by G.M. Today after the Ford offer, G.M. declined to enter the bidding and took the unusual step of publicly stating that Ford's bid price ''could not be justified.'' Ford's bid of $13.32 a share is nearly twice what Jaguar's market value was before Ford announced its intent to buy control of the company in mid-September.

Ford had $5.8 billion in cash and marketable securities as of Sept. 30. But even so, the Standard & Poor's Corporation announced today that $40 billion of Ford's long-term debt and $30 billion of its commercial paperare being evaluated for possible downgrading. S.&P. cited the Jaguar deal and the recent $3.35 billion purchase of the Associated Corporation.

Ford's offer may seem extraordinarily high for a company that made 51,939 cars last year and is now barely breaking even. But Ford executives made it clear that they were paying a premium for the Jaguar name and would invest heavily to turn the British company into a much bigger producer.

''One of our first tasks will be to discuss with Jaguar management its plans for future model development and the actions necessary to expand its manufacturing and product development resources,'' said L. Lindsey Halstead, chairman of Ford of Europe. ''Our intention would be to increase Jaguar's sales volume.''

Analysts expect Ford to invest $1 billion or more in Jaguar to double or triple its output and have it manufacture a high-volume car that would sell for $30,000 to $40,000. Ford has failed to score much of a success in either that market or the one that Jaguar is already in: luxury cars that sell for $40,000 to $60,000.

Ford tried unsuccessfully to establish a European luxury import franchise in the United States. It was called Merkur and had two models: the XR4Ti, which had a base price of $19,759, and the Scorpio, base price $28,407. Ford has just stopped selling the XR4Ti, and it announced last month that it would also stop selling the Scorpio.

At a news conference today, Sir John said G.M. had known that Jaguar expected Ford to make an offer for the company this week. But he added that Jaguar did not inform G.M. of Ford's bid, and thus did not give it a chance to top the offer before accepting it.
This afternoon, G.M. said it could not justify even trying to match Ford's bid. Ford offered $:8.50 ($13.32) a share, or a total of $2.11 billion, for the 86.8 percent of Jaguar it does not own. Since Sept. 19, when Ford declared its intent to acquire control of Jaguar, it had purchased 13.2 percent of the company for $262.1 million.

G.M. said in a statement, ''After an intensive review of Jaguar's products and plants and in view of the losses currently being sustained by them, together with Jaguar's significant future cash and other requirements, G.M. concluded that the maximum value that could be assigned to all of the Jaguar shares was very significantly below the $:8.50 being offered.''

G.M. added, ''The premium of approximately $:1.3 billion ($2 billion) over book value at yearend 1988 could not be justified.''

Although Daimler-Benz A.G. of West Germany had been negotiating possible joint ventures with Jaguar, analysts do not expect offers from other companies. The price Ford has offered would be too high for big European car companies, and Japanese companies would be reluctant to get into a takeover battle, they said.

Sitting next to Mr. Halstead at the news conference, a subdued Sir John stressed that Ford had promised Jaguar considerable autonomy. Under the agreement Jaguar's headquarters and manufacturing operations would remain in the West Midlands section of central England, it would have its own board, and it would maintain a separate dealer network. Mr. Halstead was evasive when asked about the possibility of making Jaguar cars outside Britain; he did not rule it out, but reiterated his commitment to British production.

Even before the takeover battle erupted, it became clear that changes in the market made it impossible for a small car maker like Jaguar to go it alone, said Sir John, who has headed the company for nine years. The economies of scale and bargaining clout of a giant parent like Ford, he added, would also enable Jaguar to obtain lower prices for components. Jaguar's Recent Results

Like other European makers of luxury cars, Jaguar has also been hit hard by exchange-rate problems and a downturn in the United States, its most important market. In the first half of this year, Jaguar barely broke even, and analysts expected no better performance, and possibly a loss, for the full year. Last year, Jaguar had an after-tax profit of $51.4 million on sales of $1.99 billion.

With the chance of a takeover battle between Ford and G.M. gone, Jaguar's shares fell 50 pence (78 cents) today on the London Stock Exchange and closed at $:8.29 ($12.99).

In trading on the New York Stock Exchange today, Ford's share price fell 62.5 cents, closing at $46.50.

About 26 percent of Jaguar's shares are held in the United States in the form of American depository receipts. Americans hold as much 20 percent in the form of shares bought on the London Stock Exchange.

Jaguar, once a Government-owned company, was turned over to the private sector in 1984 and was heralded as one of the success stories of the Thatcher Government's programs to get the Government out of business.

REACTION TO THE FORD TAKEOVER OF JAGUAR

Roger King MP Conservative - " The people who must be very worried tonight are the the workers at BMW and Mercedes in Germany. This deal will create a resurgence in the West Midlands, the heart of the British motor industry."

THE GUARDIAN

Jaguar unions said last night they would seek urgent meetings to ensure continuity of research and development and production. Mr Ken Gill, general secretary of the white-collar union MSF, said:

"When Jaguar was privatised we warned that the company was too small to survive as an independent manufacturer. Recent events have unfortunately proved the accuracy of that prediction."