Lucas at risk of break-up bid

Lucas Industries faces the threat of a hostile break-up bid as it attempts to finalise a merger agreement with Varity of the US, City observers believe.

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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss