The move by Ohio-based TRW, which is proposing to pay 288p in cash for each share in the UK company, put an end to weeks of intense speculation over the future of Lucas. Executives in the two companies, which had been in talks since mid-December, hailed the proposed deal, one of the largest ever in the automotive industry, as a "perfect combination". They said the merged group would be a world leader in the production of car brakes, steering systems and defence components, with combined sales of around $19bn (pounds 11.8bn).
But two hours after Lucas and TRW announced their deal, the US car parts group, Federal Mogul, said it could increase an earlier pounds 3.6bn cash-and- shares bid approach which had been rebuffed by the Lucas board last week. Federal Mogul urged Lucas shareholders to reject TRW's offer and demanded to see confidential data on Lucas already seen by TRW. The events took a further twist when it emerged that Lucas would have to pay TRW pounds 30m if the take-over fell through.
Lucas shares rose 7p to 290.5p, above TRW's offer price, an indication that the market believes that a bid battle between the two US suitors could push the final price higher.
Victor Rice, the UK company's chief executive who will become deputy chairman in a TRW-Lucas group, dismissed Federal Mogul's requests. Mr Rice, who is set to head the automotive operation of the merged entity, said the take-over by TRW had the backing of the Lucas board because the synergies between the two were "dramatically" higher.
The merger of Lucas' expertise in brakes and fuel injection and TRW's emphasis on steering and suspension would enable the company to offer a complete package of parts to the world's largest carmarkers.
Joe Gorman, chairman of TRW, said that the combined business would achieve savings of at least $200m a year within two to three years. There would be one-off redundancies and restructuring charges of $200m to $400m but Mr Gorman said TRW did not plan big job losses among LucasVarity's 25,000 employees. He admitted there would be a number of redundancies among administrative staff, but he was not planning large-scale closures of plants. "On balance, we would expect employment to grow in the UK over the next 18 months."
He said there were no plans to sell off LucasVarity's aerospace business and he did not expect to have any personality clashes with Mr Rice.
The TRW chairman said he had "every intention" of winning control of Lucas, but analysts say he could have to increase the offer by up to 10 per cent. City observers said TRW's 288p bid was not a knock-out blow. Federal Mogul would have to bid considerably higher than TRW or increase the cash consideration of its offer.Reuse content