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U.S./U.K. auto parts deal?
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January 25, 1999: 6:07 a.m. ET
Report: U.S.'s Federal Mogul may bid $6 Billion for U.K. group LucasVarity
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LONDON (CNNfn) - Shares in Britain's biggest auto parts company, LucasVarity soared 10 percent Monday as the London Stock Exchange opened for business, boosted by a press report of a possible 3.6 billion pound ($5.94 billion) bid for the group.
According to a report in London's Sunday Times, U.S. automotive group Federal Mogul is poised to launch an offer of 260p a share, a 21 percent premium over Friday's closing price of 214.75p.
Monday LucasVarity shares touched 240p.
A deal would create the world's biggest auto components company with annual sales of about 7 billion pounds.
Federal Mogul bought Britain's T&N two years ago for 1.5 billion pounds.
LucasVarity has also reportedly been holding separate talks with Tenneco or TRW about buying their automotive businesses.
Tenneco is seeking to separate its packaging side from the auto parts arm. Analysts speculate Lucas would have to bid up to £1.8 billion to secure the Tenneco operations.
TRW however has a substantially larger automotive business, with sales of $7.2 billion and structuring a deal might prove to be too much of a stretch for Victor Rice, chief executive officer of LucasVarity.
Federal Mogul chief executive Dick Snell has made quite clear his intention to expand rapidly, setting what he has dubbed "big hairy audacious goals." These include becoming a $10-billion company by 2002.
Analyst Harry Philips at WestLB Panmure says the notion of a bid from Federal Mogul would be plausible.
However, he believes it would not be the option preferred by Rice, who would have to forfeit control. "He would probably prefer some deal with Tenneco," said Philips.
Analysts suspect a bid that included a strong cash alternative would be seized by U.K. investors as a way of disposing of their shares in LucasVarity, which has become a virtually all-but U.S. company except in name.
LucasVarity was unavailable for comment on Monday. 
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