BMW Stands Firm on Rolls-Royce Bid Despite Facing Strong Competition from Volkswagen

Strategic Insights -

German automobile giant BMW remains steadfast in its pursuit of Rolls-Royce Motor Cars, refusing to raise its £340 million offer despite Volkswagen's recent £430 million bid. The BMW chairman, Bernd Pischetsrieder, expressed optimism about the bid's chances, citing an agreement with Rolls-Royce plc to use the Rolls-Royce name under license. Meanwhile, Volkswagen has acknowledged the third-party issues related to the deal, including the costs of replacing engines and any payments to Rolls-Royce plc. The fate of the Rolls-Royce brand hangs in the balance as shareholders prepare to vote on June 4, with £273 million set to be returned to ordinary shareholders if the Volkswagen bid succeeds.

Key Takeaways:

  • BMW chairman Bernd Pischetsrieder has reaffirmed the company's commitment to its £340 million bid for Rolls-Royce Motor Cars, despite Volkswagen's £430 million offer.
  • The BMW-Rolls-Royce agreement includes the use of the Rolls-Royce name under license, which BMW believes makes its offer more attractive.
  • Volkswagen has acknowledged its responsibility for third-party issues, including the costs of replacing engines and any payments to Rolls-Royce plc.
  • Shareholders will vote on the Volkswagen bid on June 4, with £273 million set to be returned to ordinary shareholders if the bid succeeds.
  • The acquisition will result in a restructuring of Vickers' capital base, including the cancellation and repayment of preference shares.
  • The sale of Rolls-Royce Motor Cars is expected to generate £25 million in related costs, including tax.
  • An interim dividend of 2.7p per share is likely, according to Vickers.

Statistics:

  • £340 million: the value of BMW's offer for Rolls-Royce Motor Cars.
  • £430 million: the value of Volkswagen's offer for Rolls-Royce Motor Cars.
  • £273 million: the amount set to be returned to ordinary shareholders if the Volkswagen bid succeeds.
  • £25 million: the estimated costs related to the sale of Rolls-Royce Motor Cars, including tax.
  • 80p: the potential dividend per share if the Volkswagen bid is accepted.
  • 55p: the dividend per share under the BMW offer.
  • 2.7p: the interim dividend per share likely to be paid.

Sources:

  • "Germany suitor believes its Pounds 340m offer for UK carmaker can still succeed", The Times, 1998.