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Iveco ( IVCGF ) purchase is biggest transaction for Tata Motors

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Tata in strong position to raise equity, debt to fund deal

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Indian firm says deal makes Europe a strategic home market

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Combined company will compete with Volvo and Daimler

(Rewrites throughout with executive comments from Tata, Iveco ( IVCGF ))

By Aditi Shah

NEW DELHI, July 31 (Reuters) - Tata Motors plans to

raise about 1 billion euros ($1.14 billion) of equity to repay

the loan funding its $4.5 billion offer to buy Iveco's ( IVCGF ) trucks

and bus business, the Indian automaker's chief financial officer

said on Thursday.

Tata and Iveco ( IVCGF ) announced an all-cash deal

on Wednesday. It will be the biggest ever transaction for the

Mumbai-based automaker, which made its last major acquisition in

2008 when it bought Jaguar Land Rover from Ford Motor ( F ) for

$2.3 billion.

Tata Motors finance chief PB Balaji said Morgan Stanley ( MS )

and MUFG will underwrite the $4.5 billion bridge loan to

secure the deal. The company, he said, will then look at a

capital raise of around 1 billion euros along with some term

debt "sometime in the next 18 months" to pay down the bridge

loan.

"Tata Motors has never been stronger in terms of its

financial position to take on such a transaction," Balaji said

during a media briefing, adding that both Tata and Iveco's ( IVCGF )

businesses are cash-generating.

Shares of Tata Motors fell as much as 2.4% on Thursday

morning, reflecting concerns over the amount of debt the company

will need to take on for the deal. But they recouped some

losses, ending the day 0.4% lower in a weak Mumbai market.

ACCESS TO EUROPE, LATIN AMERICA

Tata Motors' trucks and bus business recorded its highest

ever profit of over $750 million in the last fiscal year that

ended on March 31. And its consolidated automotive business,

which includes Jaguar Land Rover and passenger cars, is

debt-free.

The deal will immediately triple Tata's commercial vehicles

revenue, giving it access to Iveco's ( IVCGF ) markets including Europe -

where the Italian group competes with Volvo and

Daimler - as well as Latin America.

It will also allow Tata to launch Iveco's ( IVCGF ) products in India

and elsewhere.

"We can look at some of Iveco's ( IVCGF ) tippers, vans and buses

coming into the Indian market. We can also look at the Latin

American market, where some of our trucks or small commercial

vehicles can go," Tata Executive Director Girish Wagh said.

Iveco ( IVCGF ) and Tata's commercial vehicles business will have

combined revenues of about 22 billion euros, with half coming

from Europe, 35% from India and the remainder from the Americas.

Tata has already identified synergies to boost revenues and

cut costs, Wagh said, adding there is some overlap in research

and development in the areas of powertrain technologies,

electrification and connectivity, which can be combined.

Wagh added that Tata can also leverage India's "frugal

engineering skills" and bring down material costs at Iveco's ( IVCGF )

European factories.

Iveco ( IVCGF ) CEO Olof Persson, meanwhile, told an analyst call on

Thursday that Tata had committed to maintaining the "industrial

footprint and employee communities". Iveco ( IVCGF ) employs around 36,000

people, including 14,000 in Italy.