Lucas to stay British firm

THE STRATEGY of LucasVarity, and the credibility of its chief executive, Victor Rice, lay in tatters yesterday after shareholders defeated in a down-to-the-wire vote his plans to move the car parts and aerospace group to the US.

The shock result is a coup for several UK institutions, including Schroders and Legal and General, which were seriously opposed the move. It is certain to fuel speculation on the future of Mr Rice. After a tense night of vote counting, the company announced that the proposed move of its headquarters and primary stock market listing from London to the States had not been approved by the required number of shareholders.

In a terse statement, Lucas said that it had won one of the two votes but had lost the vital second ballot by the thinnest of margins. The company said its proposal had received approval from the holders of 74.42 per cent of its shares, just short of the 75 per cent required. This was enough to block the proposed move, even though Lucas won a simple majority of shareholders who voted. Turnout, at around 80 per cent, was in line with expectations.

Analysts said that the defeat in the 75-per-cent-majority-needed vote was extraordinary because more than 60 per cent of Lucas shares are in the hands of US shareholders, who were widely believed to be in favour of a transfer to the US.

Mr Rice remained tight-lipped in the aftermath of the defeat, leaving the company's chairman, Ed Wallis, to say that it was "business as usual" and that strategy was unchanged.

However, industry experts said that the defeat would fuel criticism of Mr Rice's poor relationship with shareholders and of his perceived inability to explain the rational for the move to rebellious institutions.

LucasVarity, formed in 1996 from the merger of Lucas Industries and Varity of the US, had argued that a move to the US would boost its share price and enable it to raise cheaper capital for acquisitions.

UK shareholders, however, opposed the move because it would have deprived them of Lucas FT-SE 100 stock, leaving them with illiquid second rate paper. UK shareholders said Lucas's reason for leaving Britain were unconvincing, noting that the company had reassured the market that it would remain UK-based at the time of the merger.