Volkswagen shares dropped 1 per cent on concern that it was paying too high a price. Shares of Vickers, the UK defence company that put Rolls up for sale last October, rose 4 per cent to 245p.
"I'm amazed that they're selling to Volkswagen as Rolls-Royce fits better with BMW," said Michael Trauth, a fund manager in Stuttgart. "The price is very expensive for VW and the question remains who will supply Rolls- Royce with engines now."
The offer comes only nine days after Vickers agreed to sell Rolls-Royce to BMW for pounds 340m.
Vickers said on Thursday that it would now recommend its shareholders accept VW's higher bid at a shareholders' meeting on 4 June.
BMW shares rose 1.34 per cent on relief that the Bavaria-based company would not enter into a costly bidding war with VW over Rolls-Royce. "We are not going to raise our offer and will leave it up to the shareholders to decide," said BMW spokesman Richard Gaul. "There are still open questions on the VW offer like where are the engines going to come from, and the question over ownership of the brand name."
Mr Gaul said BMW would stop supplying its V12 and V8 engines to Rolls- Royce, as well as other parts such as air conditioning and transmissions that account for about 30 per cent of the new Rolls Silver Seraph and Bentley Arnage, if it lost the bid. BMW is under contract with Vickers to supply engines for a further 12 months before ceasing deliveries.Reuse content