BMW shares rise amidst takeover talk

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The Independent Online

Fueled by speculation that BMW was primping itself to be sold by dumping Rover last week, the family controlling the German automaker has rushed to quash rumours that it putting the company on the block.

Analysts believe the leaner BMW more focused on its core brand of luxury cars is a sure takeover target for one of the global titans in an era of auto industry consolidation.

Market and media talk of a possible takeover drove up BMW shares 7.82 per cent to close at $32.11 on Tuesday in Frankfurt trading.

Among the rumours: is that Volkswagen has its eye on the company, that Ford and General Motors are interested in the German automaker, or that BMW might be looking to join forces with Peugeot of France.

"I can understand where these rumours are coming from, because BMW minus the problem child of Rover is a very prime item that a lot of people would want to get their hands on," said Mark Little, an auto analyst with Deutsche Bank.

If a deal were to go through, BMW could fetch a price as high as 115 per cent of sales - or $40 billion, Little said.

Ford, General Motors and Peugeot would not comment on what they termed market rumours. And a spokesman for the Quandt family, which owns 48 per cent of BMW, denied it was being primed for sale, saying that the family was not in talks to sell its stake.

"One would never sell such a pearl," Thomas Gauly said. "Enthusiasm for BMW lives on in the fourth generation of Quandts."

He also denied a report that BMW chairman Joachim Milberg is about to be fired over his handling of the Rover sell-off last week of the MG and Rover auto units to the British investment group Alchemy and the sale of the sturdy Land Rover business to Ford.

The $3 billion sale of Land Rover remains a mystery to most analysts, some of whom say BMW needed to plug the gap left after the $3 billion write-off from the sale of the Rover and MG cars. The company denied that too, saying it was focusing on the development of its own off-road model, the BMW X-5.

The company also blamed the sell off on slumping Rover sales worsened by a strong pound which made the British-made autos more expensive to buy in other countries.

BMW even shocked analysts by saying that Land Rover also failed to turn a profit last year for the same reasons. That division has long been lauded as a British success story and analysts praised Ford for adding Land Rover to its lineup of such luxury cars as Volvo and Jaguar.

As for BMW, analysts say the decision on the company's future independence lies with the Quandt family, which neither needs nor apparently wants to sell.

"You almost have to be German to understand the enormous prestige attached to the Quandt family in owning BMW," Little said.

"They are wealthy beyond belief and selling it could actually cause them more problems in trying to figuring out where to invest all that money."