Volkswagen tops BMW with pounds 380m Rolls offer
Saturday 04 April 1998
Vickers, Rolls' parent company, confirmed it had received a new offer from Volkswagen but said it was unable to discuss the details because it remained locked in four weeks of exclusive negotiations with BMW, which has until the end of April to seal the terms of the deal.
BMW was thought to have secured Rolls on Monday after submitting an offer of pounds 340m. VW's initial offer was worth just over pounds 300m and was hemmed in with conditions that would have allowed it to reduce the price if BMW withdrew its contract to supply engines for the new Silver Seraph model.
The prospect of a bidding war helped Vickers' shares motor ahead 6.5p to 237p yesterday as the market braced itself for a battle to the bitter end between two rival German companies.
Vickers sources said that, in total, the BMW bid valued Rolls Royce Motors at about pounds 400m since BMW is not buying either its specialist engines and pressings businesses, said to be worth pounds 40m in total, and will also repay working capital put into Rolls since the start of the year, which is likely to be about pounds 20m
BMW has also pledged to invest a further pounds 1bn in the company over the next 10 years.
BMW's production of engines for Rolls-Royce, and its close ties with Rolls-Royce plc, the aero-engine company that owns the Rolls-Royce name, is still reckoned to give it the edge in the bid battle with VW. However, VW believes that Rolls' engine contract with BMW will oblige it to maintain supplies long enough for a new source of engines to be found.
Rolls-Royce plc has made it clear that it is in favour of the BMW deal, and could attempt to removed the Rolls-Royce name from the cars if VW emerges victorious.
Vickers says its legal advice is that the ownership clause is invalid and that if Rolls-Royce plc attempted to enforce it, the company would be in breach of European competition laws.
The clause was put in place when the Rolls-Royce business was split in two in the early 1970s and the aero-engine division was taken into state ownership. It was designed to allow Rolls-Royce plc to veto the sale of Rolls-Royce Motors to a foreign bidder if it thought the buyer was inappropriate.
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