Ford marques face up to six bids

Ford is expected to receive up to six indicative bids for Jaguar and Land Rover on Thursday, kicking off a surprisingly competitive auction of the UK luxury carmakers.

Cerberus Capital Management, Ripplewood Holdings and One Equity Partners are among private equity groups understood to be planning bids.

At least one trade buyer is thought to be planning an indicative bid. Tata Motors of India appears to be the most likely contender while Renault Nissan of France is thought to have backed away and Hyundai of South Korea early this morning said it had “no interest whatsoever” in buying another brand.

Any trade buyer is thought to be interested in only one brand.

One Equity’s partners include Jac Nasser. The former Ford chief executive established Ford’s Premier Automotive Group, which owns the two British brands and Volvo.

The auction could move quickly. Ford hopes to select two final bidders in the next couple of weeks to begin due diligence on Jaguar and Land Rover.

Ford is also considering a sale of Volvo, its third European car brand, to cut massive debts. But it is unlikely to make any decisions on the Swedish business until the UK assets are sold.

Ford would prefer to sell the two brands, which share many management functions, together but is prepared for separate sales.

The sale of Jaguar and Land Rover is likely to be controversial, especially given that private equity is the favourite. Buy-out groups have come under attack in the UK, where they are accused of cutting jobs, stripping assets and operating secretively.

Trade unions have insisted that Ford keep a stake in the companies and that any bidder keeps the three UK factories involved open.

The car sector has become particularly attractive to buy-out firms as it is one of the few areas where valuations are low. Average enterprise value-to-earnings multiples for automotive buy-outs fell from 6.2 in 2005 to 5 this year, while valuations for all takeovers rose from 8.2 to 8.4.

Buy-out firms already own automotive companies worth more than $50bn (£24bn), said Alix Partners, the restructuring firm. But most are parts suppliers rather than carmakers.

Private equity firms have moved up the supply chain recently to buy the carmakers themselves. Cerberus paid $7.4bn in May for DaimlerChrysler’s US-based Chrysler business.

Sales at lossmaking Jaguar dropped 21 per cent in the six months to June compared with a year earlier. Land Rover sales were flat in that period.

The two together sell only 300,000 cars annually.

Alchemy Partners, which bid for Rover in the UK seven years ago, and Carlyle, which owns a string of auto suppliers, have ruled out making bids.