Rolls-Royce sale expected this week

VICKERS will announce the identity of the new owner of the Rolls- Royce car maker this week.

While four groups are submitting firm bids, BMW remains the clear favourite to win the auction ahead of Volkswagen. Sources close to Vickers indicate that the bids are expected this weekend at the lower end of the pounds 300m- pounds 400m range predicted by the City.

The two UK groups fighting to retain the British identity of the marque are Doughty Hanson, a private equity group linked to Bernie Ecclestone, head of Formula One motor racing, and a consortium of Rolls-Royce admirers headed by Kevin Morley, a former Rover director.

BMW chairman Bernd Pischetsrieder has repeatedly said he would not overpay for Rolls-Royce. A BMW spokesman said on Friday: "We've put in a bid. But it has to make financial sense."

Some confusion was created by reports that Volkswagen had bid DM1.5bn (pounds 500m). However, this figure included proposed investments of DM800m, implying a purchase price of less than pounds 250m. But insiders say this figure understates the value of Volkswagen's bid.

Ferdinand Piech, Volkswagen chairman, said on Wednesday that the acquisition of Rolls-Royce would shorten the time needed for his company to enter the super-luxury class. If the bid fails, Volkswagen intends to build two limousines, one of which will use the brand "Horch" that belongs to Audi.

The strength of BMW's bid is largely based on the fact that it supplies the engines for the new Rolls-Royce that was recently unveiled to general acclaim at the Geneva Motor Show. Volkswagen has indicated that it might turn to Cosworth, Vickers' specialist engine maker, to supply the Bentley and Rolls-Royce brands. This would be a way of increasing the value of its bid.

Even if BMW fails to land Rolls-Royce, the Bavarian car maker is also determined to enter the world of pounds 100,000-plus cars. Mr Pischetsrieder commented: "It is possible that I already have an alternative to Rolls- Royce, because it is obvious that we have to be in this market segment, with or without Rolls-Royce."

Interest in the super-luxury segment is increasing. Following the collapse of Daimler-Benz's bid for Rolls-Royce, the likelihood has increased that Daimler will enter the market with its Maybach saloon. This high-tech limousine was well-received at the Tokyo and Geneva motor shows, and Daimler-Benz chairman Jurgen Schrempp expects to make an announcement about production plans in the summer.

There was some uncertainty on Friday as to whether Doughty Hanson, advised by Lazards, would manage to submit a bid before the weekend. The British consortia are not given much credibilitybecause of the high and rising costs of new model development.

Copyright: IOS & Bloomberg