Thursday, May 7, 1998 Published at 17:21 GMT 18:21 UK
VW beats BMW in race to buy Rolls-Royce
VW says it plans to use British-built engines to power future Rolls-Royce cars
Just eight days after Vickers said it had reached a deal to sell the British car company to BMW it stunned the City by announcing a new deal with VW.
The BMW deal is worth £340m, but VW looks to have trumped its rival with a £430m offer.
In a statement after the stock market closed, Vickers said it had now reached an agreement to sell Crewe-based Rolls-Royce Motors to VW.
And it added that the directors of Vickers would now recommend that shareholders reject the sale of Rolls-Royce to BMW, and instead recommend the new Volkswagen offer.
The Volkswagen offer deals a massive blow to BMW's ambitions of increasing its hold on the British motor industry.
It already owns Rover and supplies German-made engines for Rolls-Royce, but VW plans to use British-made engines.
Final decision on June 4
Another Vickers' subsidiary, Cosworth, already supplies engines to Rolls-Royce. Vickers said it and VW would review the relationship between the engine supplier and the car plant.
The final decision on Rolls-Royce's future will lie with Vickers' shareholders who will vote on the alternative offers at special meetings on June 4.
If the new deal goes ahead, investors will land a windfall of £273m, worth 80p a share, against a £188m payout, worth 55p a share, under the terms of the BMW offer.
Roger Lyons, general secretary of the MSF union, which has so far welcomed the BMW deal, said: "We were very laid back about the BMW bid because we have a very positive relationship with them as far as Rover is concerned.
"The unions will now have to look very hard at the small print to check to see if the same assurances that were given by BMW have been given by Volkswagen."
At its annual meeting last week, Vickers came under attack from shareholder on two fronts, firstly for planning to sell one of Britain's best known products to a foreign buyer and secondly for not holding out for a higher offer from another bidder.
News of the higher offer will be welcomed in the City, and now attention will focus on the response from BMW and whether it walks away from Rolls or comes back with a higher offer.
The sale of the company, which makes Rolls-Royce and Bentley models, will allow Vickers to concentrate on its other businesses such as the manufacture of the Challenger 2 tank and propeller systems for ships.