Analysts hope the two components groups are within a fortnight of announcing a pounds 3bn link-up. But they say that any slip-up in talks will dent the management record of Lucas chief executive George Simpson, who has staked his reputation on completing a deal before leaving for GEC in the autumn.
Lucas rushed out a Stock Exchange announcement on Friday following active trading in its shares the previous day.
The statement said "discussions [with Varity] are proceeding well and the board will discuss the position at its meeting today". An announcement on an agreement was unlikely "before early June".
"The general feeling is that the best time for a predator to swoop will be when merger terms are revealed," said Zafar Khan of SGST Strauss Turnbull. "Whoever is out there in the wings is running a slide rule over Lucas businesses."
That could lead ultimately to the breakup of Lucas, he warned. "If I were a predator I would know I could sell the brakes business to Varity." German electronics giant Siemens might be interested in the fuel technology side, while the aerospace operations, which Lucas has repeatedly said is not for sale, could interest Smiths Industries or TI.
Analysts now see a joint venture deal combining Varity's ABS brake technology with Lucas's brake parts manufacturing division as a non-starter.
"One huge drawback to a joint venture on brakes alone is that it would make Varity look a strange entity," NatWest's Sandy Morris said.
Chief executive George Simpson argues that Lucas needs to be lot bigger to compete in the next millennium. The company spent the Eighties trying to build up its aerospace division but has, under Mr Simpson, reverted to its automotive roots. Its diversification efforts weakened its ability to compete with the giants, however.
At the very least, his efforts of the past few weeks have fuelled a rise in Lucas shares, which closed at 235p on Friday. Mr Khan put a price of up to 300p for each Lucas share in the event of a hostile bid.