In a statement late last night the automotive engineering group Mayflower said it had no intention of bidding for Vickers. The announcement followed a statement from BMW that it would withdraw its contract to supply engines for the next generation of Rolls luxury cars if the company was taken over by Mayflower. It is also understood that Mayflower and its financial advisers BZW encountered difficulties getting the bid underwritten.
Mayflower added in its statement that it reserved the right to renew its bid interest in Vickers should BMW's position change in respect of Rolls-Royce. The development would seem to put paid to the takeover threat hanging over Vickers, leaving it free to go-ahead with the sale of Rolls- Royce which it announced three weeks ago. BMW is one of the leading contenders to acquire the business.
Following that announcement it emerged that Mayflower was contemplating a bid for the entire group and then selling off the Vickers defence business to concentrate instead on the group's luxury cars, Cosworth engineering and propulsion businesses.
Confirmation of Mayflower's interest in bidding was flushed out after the Vickers chairman, Sir Colin Chandler, issued a Stock Exchange statement saying it was facing a possible hostile bid from Mayflower.
Analysts were always sceptical, however, of Mayflower's ability to mount such a bid. It would have had to take on about pounds 650m in debt to finance the takeover.
The decision not to bid is a severe setback for the Mayflower chief executive John Simpson, who has built up the group rapidly on a series of acquisitions, and also an embarrassment for its advisers BZW.
BMW was always likely to have a pivotal role in determining the fate of Rolls-Royce and Vickers. It is supplying the 12-cylinder engine for the new Rolls model due out in 18 months and has a close working relationship with both Rolls-Royce motor cars and also Rolls-Royce aero engines, which owns the rights to the famous name.
A BMW spokesman said: "In the event that Mayflower acquired control of Rolls-Royce, BMW would be minded to terminate its agreement with Rolls- Royce." BMW added that it had the right to do so in the event of a change of ownership.
Barring another rival bid for Vickers, the way is now open for a straight auction to decide the fate of Rolls-Royce, which some analysts believe may fetch up to pounds 600m. Apart from BMW, which is favourite to acquire the business, Vickers is thought to have indications of interest from Daimler Benz, Ford and Chrysler of the US and Fiat of Italy, which also owns Ferarri.
Last night's developments may presage further problems for Mayflower, since it is also a supplier to Rover, which is owned by BMW. Mayflower supplies body panels to both MG and Land Rover and has also designed the body panels for the new Rolls-Royce and the pressings plant that will manufacture them.
Vickers said last night that it was now concentrating on a strategy of building shareholder value without the distraction of a potential bid.