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.

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The firms estimate the deal will lead to cost savings of £200m within two years, but said those savings would not primarily result from job cuts from Lucas Varity's 51,000 strong worldwide workforce.

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.

Big premium

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.

The firm employs 51,000 employees worldwide

LucasVarity's chief executive Victor Rice will head up the new group's combined automotive operations.

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 leap

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.

Historical ties

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.