Revealed: Schroders move on Vickers

Schroders Investment Management was prepared to sub-underwrite a pounds 600m rights issue planned by Mayflower in order to fund its aborted bid for Vickers, owners of Rolls-Royce Motors, according to sources close to the company.

The support for Mayflower's hostile bid indicates that Schroders is prepared to see the defence and engineering group split up, unless it sells Rolls- Royce for considerably more than the pounds 400m suggested by City analysts. Schroders is Vickers' largest shareholder with a 19 per cent stake. It also controls around 4 per cent of Mayflower.

Last week, Mayflower abandoned its proposed bid rather than upset BMW, a big customer that is expected to vye with rival German car maker Volkswagen in the bidding for Rolls-Royce.

Mayflower said it would renew attempts to buy Vickers only if BMW changes its mind. Mayflower planned to keep the car-maker and the Cosworth engineering business and sell off Vickers' defence interests. Vickers' shares fell last week from 249p to 232p.

BMW threatened to break its contract to supply engines for the new Rolls Royce models if Mayflower bought Vickers. But, according to people familiar with the talks, the real threat was to the huge orders Mayflower receives for the body panels which it supplies to Rover, the BMW subsidiary.

The interest in the UK luxury car-maker is turning into a high stakes poker game. Neither BMW nor VW has yet made an official bid, but both have approached Lazard Brothers, the investment bank that is handling the sale.

Other companies reported to be interested include General Motors, Chrysler and Toyota and Rolls-Royce management. None, however, has confirmed its involvement.

VW, however, did confirm its interest last week in a move that should ensure a competitive auction. Analysts do not rule out the possibility that a bidder who wants Rolls-Royce may have to copy Mayflower and launch a bid for the whole of Vickers.

VW, which is twice the size of BMW in terms of sales, certainly has the money to pay a high price. It has cash flow of Dm5.4bn (pounds 2bn) and is planning to sell shares for about Dm7bn. With that spending power, it could easily outgun BMW.

The main problem for potential bidders has been BMW's stranglehold over negotiations because of its joint venture with the owner of the Rolls brand name, airplane engine maker Rolls-Royce, as well as the engine contract itself.

But Volkswagen is currently developing its own V12 engine, the favoured engine size for cars in the Rolls-Royce class. The company presented an Italian-designed sports car with a 12-cylinder, 420-horse power engine at the Tokyo Motor Show.

The concept car is known as the "W12," in reference to the two V6 engines that are joined at a 72-degree angle to resemble the letter W.

"Clearly, Rolls-Royce would have to delay the launch of the new product," expected next year if BMW pulled out of delivering Rolls engines, said Salomon Brothers' analyst John Lawson.

"I think it can be done," he said. "The W12 engine probably would do the trick, and there is plenty of space underneath the bonnet."

Mr Lawson sees the costs of delaying the launch and fitting a new engine at about a "few hundred million pounds".

Some analysts are not convinced that in the end VW, better known for its mass-produced Golf and Beetle cars, will make a serious bid for Rolls.

"I think they [VW] are just looking to muddy the water," said David Leggett, an analyst at CSM Europe. "VW has ambitions at the high end, but they are likely to do it themselves."

Copyright: IOS & Bloomberg

Start your day with The Independent, sign up for daily news emails
News
Sir David Attenborough
people
Life and Style
Young girl and bowl of cereal
food + drink
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
Sport
football
PROMOTED VIDEO
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
News
i100
Arts and Entertainment
Ready to open the Baftas, rockers Kasabian are also ‘great film fans’
musicExclusive: Rockers promise an explosive opening to the evening
Life and Style
David Bowie by Duffy
fashion
Arts and Entertainment
Hell, yeah: members of the 369th Infantry arrive back in New York
booksWorld War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel
News
advertisingVideo: The company that brought you the 'Bud' 'Weis' 'Er' frogs and 'Wasssssup' ads, has something up its sleeve for Sunday's big match
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching