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Rolls-Royce in Vickers bid
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September 20, 1999: 8:28 a.m. ET
U.K. engineers in surprise $933M tie-up; Rolls shares fall, Vickers' rocket
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LONDON (CNNfn) - British engineering group Rolls-Royce launched a $933 million friendly bid Monday for rival Vickers in a move aimed at creating a global leader in marine propulsion systems.
The deal surprised the market and sent Vickers shares soaring 48 percent in London.
Rolls-Royce (RR), the world's number-two maker of aircraft engines behind General Electric Co. (GE) of the United States, is buying its rival for its marine division, which accounts for half of Vickers' business.
Rolls Chairman Ralph Robins has said the sale of the land-based defense systems side of Vickers is "inevitable."
Some analysts are concerned that Rolls may be overpaying in acquiring the whole company. Vickers reportedly had turned down a number of bids for its marine division alone, insisting that only the entire company was for sale.
"There was no a la carte; it was a set menu," Brian O'Keefe at Commerzbank told Reuters. Rolls stock was down almost 5 percent in London in a positive market.
Rolls, which builds gas turbine engines for commercial and military use in addition to its aerospace activities, has been avidly eyeing rapid growth in the market for marine engines.
"Our strategy is to get to number one or two in the various markets in which we operate. We are up there in aerospace. This will put us there in marine," Robins said.
The deal will boost the marine division's contribution to total Rolls sales to around 20 percent, or 850 million pounds ($1.4 billion).
Rolls-Royce is offering 250 pence cash per Vickers share. Shareholders accepting the bid also will have the option of receiving an interim dividend of 2.85 pence per share from Vickers.
The bid represents a 53 percent premium over Vickers' closing price Sept. 17.
Vickers has streamlined its business in recent years, including the disposal of its Rolls-Royce auto unit.
The division that makes the cars, which share the same name and marque as Vickers' bidder, was disposed of in an unrelated and complex deal last year. German carmaker Volkswagen bought the Rolls factory while rival BMW will take control of the name in 2003.
Vickers also recently shed its luxury yacht business and its medical division to strengthen its focus on marine propulsion systems, defense systems, and super alloys and turbine engine components.
Vickers reported $1.5 billion in sales in 1998. 
-- from staff and wire reports
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