Thursday, January 28, 1999 Published at 12:02 GMT
Business: The Company File
LucasVarity agrees £4bn TRW bid
LucasVarity put the brakes on a bid by US rival Federal-Mogul
American group TRW has launched a $6.6bn (£4bn) bid for the UK's biggest motor parts firm LucasVarity.
If the deal goes ahead it will create a car parts giant, building anything from brakes to seatbelts and airbags.
The cash offer, recommended to shareholders by LucasVarity, values the group's shares at 288p each and trumps the $6.5bn (£3.9bn) bid from US rival Federal-Mogul which was rejected on Monday.
Federal-Mogul was later reported to be considering tabling a revised offer for LucasVarity and urged the UK group's shareholders to wait before responding to the TRW offer.
"The fight is still wide open," said Collins Stewart analyst Mustapha Omar.
It employs around 25,000 staff in the UK, most of which are based in and around Solihull.
However Joe Gorman, chairman of Cleveland, Ohio-based TRW warned that some older plants would have to close, although the number of closures is unlikely to exceed 10.
The TRW bid represents a premium of 33.8% more than the LucasVarity share price before it announced it was in takeover talks. At yesterday's stock market prices, TRW and LucasVarity would have a combined market value of £8.4bn.
He said: "For our employees, this represents a tremendous opportunity to become part of a dynamic global leader in technology, manufacturing and service."
Mr Gorman said: "This transaction is a great fit for our automotive business and gives us the scale to be a leader in integrated vehicle control systems and modules.
"Specifically, it enables the integration of TRW's steering and suspension businesses with LucasVarity's braking business into the next generation of vehicle control systems."
He added that the two companies would see accelerated growth from the combination of their electronics businesses.
The strong LucasVarity aerospace business also extended TRW's customer base in space, defence and information technology.
Shares in LucasVarity jumped 8.5p to 292p - slightly beyond the offer price, in the hope of a rival bid.
However, TRW has built into its offer document a clause which states LucasVarity would have to pay a £30m forfeit if it were to spurn the bid in favour of a better offer.
The UK engineering firm Lucas merged with US-based Varity in 1996.
It is one of the oldest names in the UK engineering industry with a 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.
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 embarrassing 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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