LucasVarity Deal Clears Way for TRW Merger Amid Federal-Mogul Withdrawal

Strategic Insights -

The long-standing uncertainty surrounding LucasVarity's fate has finally come to an end, as Federal-Mogul, the US car parts group, has withdrawn its interest in the autoparts and engineering group. This decision clears the path for LucasVarity to proceed with its agreed £4 billion bid with TRW, a US rival. The resulting merger between TRW and LucasVarity would create one of the world's largest suppliers of car and aerospace components, fulfilling Victor Rice's goal of delisting LucasVarity from the London Stock Exchange and moving it to the US. Rice, who had faced opposition from shareholders last year, has secured a position as chief executive of the combined car industry division of TRW and is set to receive £13 million from cashing in his share options.

Key Takeaways:

  • Federal-Mogul's withdrawal clears the way for TRW to complete its £4 billion bid for LucasVarity.
  • The combination of TRW and LucasVarity will create one of the world's largest suppliers of car and aerospace components.
  • Victor Rice, former CEO of LucasVarity, has secured a position as chief executive of the combined car industry division of TRW and will receive £13 million from cashing in share options.
  • Federal-Mogul would have needed to beat TRW's 288p per share offer and cover a £30 million fee in order to secure the deal.
  • If Federal-Mogul had acquired LucasVarity, it would have sold off the aerospace arm, whereas TRW has stated its intention to retain this division.
  • TRW was referred to as a "white knight" after its interest in LucasVarity became public, following Federal-Mogul's rebuffed bid.
  • The merger is a culmination of Victor Rice's plan to delist LucasVarity from the London Stock Exchange and move it to the US.
  • LucasVarity was formed just two years ago, resulting from the merger between Lucas and Varity of the US.

Statistics:

  • £4 billion: The agreed bid price for LucasVarity by TRW.
  • 288p: The per-share price offered by TRW, topping Federal-Mogul's initial approach at 280p.
  • £30 million: The fee LucasVarity agreed to pay TRW in the event the deal failed through.
  • £13 million: The estimated amount Victor Rice will receive from cashing in his share options.
  • £4 billion + £30 million: The estimated total cost of the deal for TRW, excluding additional acquisition expenses.

Sources:

  • "The bitter battle for LucasVarity appeared to end late yesterday..." (The Financial Times, date not specified)
  • "The combination of TRW and LucasVarity... creates one of the world's largest suppliers of car and aerospace components." (The Financial Times, date not specified)
  • "Victor Rice, the chief executive, to delist LucasVarity on the London Stock Exchange and move it to the US..." (The Financial Times, date not specified)
  • "Federal-Mogul said it was no longer interested in buying LucasVarity..." (The Financial Times, date not specified)
  • "Dick Snell, chief executive and chairman of Federal-Mogul, promised to pursue other acquisitions." (The Financial Times, date not specified)
  • "If Federal-Mogul had bought the business it would have sold off the aerospace arm..." (The Financial Times, date not specified)
  • "TRW was dubbed a 'white knight' after its interest in LucasVarity became public..." (The Financial Times, date not specified)