Tata Motors set to acquire Italian truck maker Iveco for $4.5 billion in its biggest deal to date

Mumbai: Tata Motors is all set to buy Italian truck maker Iveco from its principal shareholder, the Agnelli family, for $4.5 billion (3.9 billion, making it the Tata Group’s second-largest acquisition after Corus and the largest ever for the automobile major, people aware of the discussions told ET.

In 2008, Tata Motors bought Jaguar Land Rover (JLR) for $2.3 billion.

A formal announcement on the takeover is expected as early as Wednesday, said the people cited above.

The boards of Tata Motors and Turin-based Iveco are meeting on Wednesday to approve the transaction, said the people cited above on the condition of anonymity, as the talks are still in private domain.

Iveco said on Tuesday it was in “ongoing, advanced” talks with different parties for two separate transactions regarding its defence business and the rest of the company.



Exclusivity Agreement
“The board of directors of the company is in the process of carefully reviewing and evaluating all aspects of these potential transactions,” the company said in a statement, without giving further details.

People aware of the proposed M&A deal structure told ET that Tata Motors would buy 27.1% from Exor, the investment company of the Agnelli family, and launch a tender offer (similar to India’s open offer mechanism) to buy out the other smaller shareholder groups. Exor also controls 43.1% of the voting rights of the truck maker.

Iveco is demerging its defence business, which will not be a part of the Tata Motors transaction.

The Tata Group is confident of buying 100% of the listed Iveco without the defence business.

The Italian company had said in May that it would press ahead with plans to either spin off its defence business by the end of 2025 or sell it, having already received offers from potential buyers.

Shares of Iveco surged as much as 7.4% intraday on Tuesday on expectations of a transaction. The stock has more than doubled this year, valuing the company at $6.15 billion.

Past partnerships
Exor and the board of Iveco are believed to be in favour of the sale to Tata as the Agnellis have been an old ally of the group and its former chairman Ratan Tata, a motorhead himself. Tata also had an old joint venture with Agnelli family flagship Fiat Motors in India. The Agnellis are also prominent stakeholders in Ferrari and also control Stellantis, the Dutch automotive group that has subsumed the Fiat brand.

Morgan Stanley is advising Tata Motors, while Goldman Sachs is working with Agnellis and Iveco. Clifford Chance is the legal advisor.

“Discussions have been ongoing for the last one and a half months and have intensified in recent weeks,” said one of the sources cited above. “Both sides entered into an exclusivity agreement for bilateral negotiations. The exclusivity is due to lapse on August 1.”

Tata Motors plans to route this transaction through a Dutch entity, which will be fully owned by Tata Motors. Reuters was the first to report about Tata-Iveco talks for a possible deal on July 18.

Mails sent to Tata Motors and Tata Sons remained unanswered till press time.

An Iveco spokesperson did not respond to ET’s detailed questionnaire.

In a market dominated by Volvo, Daimler and Traton, Iveco is the smallest of the large European truck makers and has always been seen as a takeover target. But the sensitive defence business made it a strategic operation for the Italian government.

In 2021, the government blocked an offer from Chinese rival FAW. At that point, the Agnellis controlled Iveco through their industrial conglomerate CNH Industrial. It was subsequently spun out and listed separately in early 2022.

Analysts believe selling the defence unit to a local entity would sweeten the demands of the Italian government to keep the business in local hands. That would also facilitate a deal with Tata for the rest of the business, which also includes commercial trucks, powertrains, buses and other specialty vehicles.

Similarly for Tata, it will give them access to technology, innovation and markets for the CV business which has been a laggard. Iveco is present across Latin America, North America though Europe contributes 74% to its revenues. Tata’s CV division is soon to get listed independently but earns 90% of revenues from India. In 2004, Tata had acquired Tata Daewoo, for Rs 246.3 crore. In FY25, that unit generated Rs 5,394 crore in revenue (down 11% year-on-year), and saw operating margins drop to just 1% from 4% the previous year.

A successful acquisition could nearly triple commercial vehicle revenues from Rs 75,000 crore to over Rs 2 lakh crore, but margins remain a concern: Tata’s ebit margin is 9.1%, while Iveco’s adjusted commercial vehicle margins hover around 5.6%, according to an analysis by ET Prime.

The Iveco management had given guidance that the industrial business — including the defence unit, which contributes about 13% of ebit (earnings before interest and taxes) — could generate euro 400 million-450 million in free cash flow in CY2025.