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Sunday, January 24, 1999 Published at 14:03 GMT

Business: The Company File

Federal-Mogul set for £3.6bn Lucas bid

Shareholders put the brakes on LucasVarity's move to the US

US motor parts group Federal-Mogul is reported to be on the verge of launching a £3.6bn ($5.95bn) bid for LucasVarity, Britain's biggest motor components company.

Industry experts believe Federal-Mogul, headed by Chairman and Chief Executive Dick Snell, plans to offer around 260p per share for Lucas, which had closed at 214.75p on Friday.

[ image: The firm employs 24,000 workers in Britain]
The firm employs 24,000 workers in Britain
If Federal-Mogul, which purchased Britain's T&N two years ago for £1.5bn, were to take over Lucas, it would become one of the world's biggest motor component groups with annual sales of almost £7bn.

However Lucas's Chief Executive, Victor Rice, might seek to fight Dick Snell by finding a higher bidder.

In the absence of a higher bid, Federal-Mogul offer would probably be backed by British investors such as Schroder Investment Management, with 11% of Lucas, as well as L&G and Mercury Asset Management, each with 2.3%.

Big American shareholders include Capital Group, with about 7% and JP Morgan with 3.3%.

Sell-off speculation

The Sunday Times suggested that Federal-Mogul's takeover of Lucas would probably lead to the sale of Lucas's aerospace operation, which is valued at around £600m.

However the newspaper said Victor Rice did not want a deal with Federal-Mogul but favoured an alliance with the automotive side of TRW, which is considering spinning off its motor components arm.

Historical ties

The UK engineeering firm Lucas merged with US-based Varity in 1996.

It is one of the oldest names in the UK engineering industry with as 100 year old history and 24,000 employees in Britain.

As well as brakes and other automotive parts, it also produces components for the aircraft industry.

No-one at LucasVarity was available for comment on the rumours.

US move defeated

Chief Executive Victor Rice failed in his attempt to move Lucas's headquarters to the United States last year.

The group claimed the move was vital to keep up with the consolidation of the car and aerospace industry.

But shareholders inflicted an embarassing defeat by turning down the scheme amid claims that its directors were looking to cash in on the much higher pay packets in the US.

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