Lucas move ballot is too close to call

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The Independent Online
LUCASVARITY, the Anglo-US engineer, was yesterday preparing for a week of uncertainty ahead of a finely balanced shareholders' vote on the move of its headquarters and primary market listing to the US.

The move is strongly opposed by a number of City institutions, including Schroder Investment, Lucas's largest UK investor. Analysts said the outcome of Friday's vote was too close to call.

The car parts and aerospace group, formed in 1996 from the merger of Lucas Industries and Varity of the US, shocked investors last month with plans to switch domicile to America.

Victor Rice, Lucas's US-born chief executive, argued that the move would allow the company to compete more effectively and be closer to its main customers. The fact that 60 per cent of Lucas shareholders are now US- based, and the ability to deliver a lower cost of capital, also favoured a Wall Street presence, he said.

The decision angered several UK institutions which are set to lose their holdings in Lucas's FTSE 100 stock. Its replacement, a London-traded security which would mirror the New York-listed stock, was criticised as illiquid and inferior.

Lucas's board has to clear two obstacles to win Friday's vote. First, it needs a 75 per cent majority of votes cast by value. At present, Schroders, Legal & General, Norwich Union and Standard Life, which together control around 15 per cent of the shares, have indicated they will oppose. They need to gain the support of a further 10 per cent of shares to block the move. Analysts say the company, supported by its US shareholders and the UK fund manager, Mercury Asset Management, will probably win this vote. Mr Rice should also be helped by the controversial decision to stick to the rule book and count any abstentions from holders of American Depositary Receipts (US-listed shares) as votes in favour.

Less clear is the outcome of the second vote, which requires Lucas to win a simple majority of all votes cast on a "one-man-one-vote" basis. The crucial constituency in this ballot is Lucas's 17,500 small shareholders, whose decisions could swing the vote.

Lucas has said it is confident of winning both votes, but analysts caution that the presence of the second ballot, highly unusual in votes of this kind, increase the chance of defeat.

There is speculation that if Lucas loses, the board will quickly call another vote. Mr Rice appears determined to move Lucas to the US. He has dismissed reports that he might leave if he loses this battle.