Lucas rejects pounds 3.9bn offer from Federal

LUCASVARITY, the car parts and aerospace group, yesterday rejected a pounds 3.9bn takeover bid from Federal-Mogul, its acquisitive US rival.

The American company said LucasVarity had refused to open talks over a 280p-a-share offer to create a motor components giant with sales of over pounds 7bn and more than 70,000 employees worldwide.

The rejection of the cash and shares offer - pitched at a 40 per cent premium to Lucas's share price before the start of takeover speculation - sparked an angry reaction from Federal-Mogul's outspoken chief executive, Dick Snell.

In an open letter to Lucas chief executive, Victor Rice, and chairman Ed Wallis, he said he was "disappointed, suprised ... dismayed" at Lucas's refusal of the bid, which was tabled last week during a secret meeting between the three men. He added that 280p was a "full price which would offer compelling value to your shareholders and ... is worthy of their consideration".

Sources close to Federal-Mogul, which last year had sales of $7bn (pounds 4.3bn), said Mr Snell remained keen to strike a deal with the UK company but had still not decided whether to launch an hostile bid.

City analysts said Mr Snell's letter was an attempt to convince Lucas shareholders to put pressure on the board to accept the offer. However, leading investors in LucasVarity, which has a large US shareholder base, reacted coolly to the offer. "You could argue that the company is worth more than that," one said.

Experts said the rebuff was more likely to spark a bidding war for the UK group, which has been trying to strengthen its US ties since the collapse of a controversial plan to move to the US in November. The company has said it was in talks with several groups, believed to include the US engineering giants TRW and Tenneco.

News of Federal-Mogul's offer came after the London market closed. Earlier shares in Lucas, which had sales of pounds 4.7bn last year, had risen 13.6 per cent to 244p after the company made a statement confirming "preliminary discussions with several companies".

A takeover of LucasVarity would be the latest in a string of ambitious acquisitions masterminded by Mr Snell. Federal-Mogul is smaller than Lucas in market value, but its sales have soared due to a number of large purchases, including last year's pounds 1.5bn acquisition of the UK brake pads business, T&N, and of the car parts unit of the US engineering giant Cooper Industries.