T&N backs pounds 1.5bn bid from Federal Mogul

T&N, the UK car parts maker, yesterday backed a takeover bid from Federal Mogul after the US rival upped its cash offer from pounds 1.25bn to pounds 1.5bn.

However, several of T&N's big institutional shareholders have yet to accept the revised offer which is equivalent to 260p for each T&N share. One large institutional shareholder said yesterday: "We don't feel this reflects the true value within T&N and we are reserving judgement on accepting the offer."

Another said: "There is a long way to go before the deal finally goes through. We are comfortable with the situation but of course we would be happier with a higher offer."

Sir Colin Hope, T&N's chairman said yesterday that he had held talks with many of the other car parts groups including US group Dana Corporation but no other offer had been forthcoming. However analysts believe T&N is likely to continue to hold talks with other rivals in an attempt to flush out a higher bid.

The Federal Mogul bid will also face an investigation from the US and European competition authorities due to the combined group's dominance in engine bearings. Dick Snell, chairman of Federal Mogul conceded the group would have to sell some of its US engine interests but said Federal Mogul had no intention of disposing of any other businesses.

Sir Colin will stay with the group in a new role as international adviser. In addition he is likely to receive a pay off of around pounds 320,000, equivalent to his salary last year. Sir Colin and T&N's directors stand to make a profit of nearly pounds 3m on share options.

Federal Mogul plans to fund the deal, which will more than double its size, by issuing around $800m of new equity according to analysts.

Federal Mogul is likely to make substantial redundancies in the US and Europe but hopes to retain a large proportion of T&N's senior management. It expects to reap $100m of cost savings from the deal.

The deal marks the latest stage in the consolidation of the worldwide car parts industry in response to manufacturer's demands to cut costs by using fewer suppliers.