Tata Motors to Acquire Iveco's Commercial Vehicle Arm for €3.8B

• Tata Motors to buy Iveco’s commercial vehicle unit for €3.8B, excluding its defence business
• Shareholders offered €14.1/share plus €5.5–€6.0 dividend, a 22%–25% premium
• Tata commits to jobs and operations for 2 years post-deal

Tata Motors of India will acquire the commercial vehicle business of Italy's Iveco Group in an all-cash transaction worth about €3.8 billion ($4.4 billion), the company said recently. 

The acquisition will not include Iveco's defence business, which is being sold separately to Leonardo, the Italian state-backed defence company. The transaction will be made by Tata Motors through its wholly-owned subsidiary, TML CV Holdings PTE LTD, or a new Dutch entity.

Tata Motors plans to make a voluntary tender offer of €14.1 per share in cash for all outstanding common shares of Iveco Group; however, the transaction will be managed only if the defence operations are sold away. 

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Suzanne Heywood, Chair of Iveco Group said, "We are proud to announce this strategically significant combination, which brings Ivecother two businesses with a shared vision for sustainable mobility. Moreover, the reinforced prospects of the new combiIvecon are strongly positive in terms of the security of employment and industrial footprint of Iveco Group as a whole".

The offer indicates a substantial premium to the valuation of Iveco's commercial vehicle business. With an anticipated special dividend between €5.5–€6.0 per share involved in the defence sale, the total value of the completion offers a premium of  22%–25% compared to IVECO's three-month average share price of 16.02. On a comparable basis, even after factoring in the dividend, the offer provides a premium of 34%–41%.

Tata Motors has secured full financing for the acquisition, which supports payment certainty and ease of execution. Tata has also stated its intention to embrace the existing strategic direction of Iveco and protect the interests of employees, suppliers, and customers. Tata has made non-financial commitments in the agreement to keep existing operations and employment levels for at least two years after the completion of the transaction.