Outlook: LucasVarity

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The Independent Online
THERE ARE more ways than one to skin a cat. Having failed to get shareholder approval to relocate LucasVarity from Birmingham to Buffalo, New York, Victor Rice, its chief executive, seems intent on achieving his goal of a New York listing by other means.

The preliminary merger discussions that LucasVarity's chief executive has entered into with a variety of rival US car components groups, led by TRW, look designed to achieve the same end.

Who would bet against Mr Rice getting his way? As even a strong-minded chairman like Ed Wallis discovered, when Mr Rice puts his shoulder to the wheel, there is little option but to push with him, jump out of the way or risk being flattened.

The arguments advanced in favour of securing a US-listing - that it would improve LucasVarity's stock market rating and give it easier access to capital - always looked a little tenuous. There is no shortage of US appetite for LucasVarity stock right now and as the French car parts maker Valeo has shown, a New York listing is not a prerequisite for a top-notch rating.

Still, Mr Rice obviously feels more at home on the other side of the pond, and by hook or by crook, he seems determined to have his company based there. Unfortunately it is not clear that the merger plan has any more to commend it than the straight switch of domicile approach. Whereas the "merger" of Varity and Lucas in 1997 never pretended to be anything other than a US takeover of a once great but faded British engineering name, on this occasion the boot will be on the other foot.

Bar none, the suitors Mr Rice is talking to are bigger than he is, which means he risks negotiating from a position of weakness. There is talk that LucasVarity may stitch up a series of alliances with several partners. But if further cost-cutting in an increasingly competitive world is the real name of Mr Rice's game, then the cleanest deal is a straightforward takeover. The danger is that in his desperation to cut one and with it his move back to Buffalo, he will allow his shareholders to be disadvantaged.

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