Federal Mogul lines up pounds 3.6bn LucasVarity bid

FEDERAL MOGUL, the acquisitive US engineering company, is eyeing up a pounds 3.6bn bid for LucasVarity, the motor components and aerospace group led by Victor Rice.

The board of LucasVarity, chaired by Ed Wallis, is understood to have been sounded out by advisers to Federal Mogul but no offer has yet been made.

Federal Mogul is led by Dick Snell, rated one of America's hottest corporate properties. He has already swooped on the UK motor industry once, acquiring the brake pads business T&N last year in an agreed pounds 1.5bn deal. Hostile bids are not Mr Snell's usual style, suggesting that he would prefer an agreed deal. But one industry source said: "If it comes to a full-scale punch-up, I think Dick will go for it."

Federal Mogul is the smaller of the two companies, with a market capitalisation of pounds 2.6bn, but it has been expanding rapidly, buying Cooper Industries as well as T&N. A successful bid for LucasVarity would create a business with pounds 7bn in sales.

The approach is thought to have been made through Merrill Lynch, which handled a recent bond issue for Federal Mogul. An offer pitched at around 260p a share, compared with LucasVarity's closing price on Friday of 215p, has been spoken of.

A bid battle would pitch two of the motor industry's most colourful characters against one another. Under Mr Snell's leadership, Federal Mogul has gained a sky-high rating on Wall Street, helping it to finance its expansion drive.

Mr Rice, meanwhile, is best known for the failure of his controversial attempt to shift LucasVarity's headquarters and primary listing to the US.