However, Federal-Mogul said it could raise its initial pounds 3.6bn cash-and- paper offer for Lucas in a bid to trump TRW's cash bid. Federal-Mogul, one of the largest car parts makers in the US, is due to decide on a counterbid over the next few days after spending more than a week examining the Lucas books.
The news came as TRW was preparing to post its offer document to Lucas shareholders this weekend. In a briefing with US investors, the chief executive Dick Snell said that it was "unlikely" that the company would mount an all-cash assault on Lucas.
Industry analysts had been predicting that Mr Snell would find it difficult to summon the financial resources for an all-cash offer due to Federal- Mogul's overstretched balance sheet.
Mr Snell's statement is a blow for Lucas UK shareholders who are unwilling to hold US paper and have been hoping for a cash bid from Federal-Mogul. City analysts were last night predicting that if Mr Snell is to succeed in the battle with TRW he would have to devise a method to allow British shareholders to take the cash, leaving the Federal-Mogul shares to US investors. Many UK institutions, which account for about 45 per cent of Lucas shareholders, are not allowed to own US shares and are set to vote down any cash-and-paper offer.
During the briefing, Mr Snell said that, if Federal-Mogul wins the bid war, it would quickly sell Lucas aerospace business. "Aerospace does not fit at all ... We have had wild interest in the business from the aerospace industry and an heated auction for that is easy to conceive."
The division could attract bids from a number of companies in the rapidly consolidating aerospace industry. City analysts said the list of potential bidders would be topped by the UK groups Smiths Industries and TI, with several US groups also likely to enter the fray.