Volkswagen Bypasses Vickers Board to Present Direct Offer for Rolls-Royce Motor Cars

Strategic Insights -

Volkswagen, a major bidder in the Rolls-Royce Motor Cars auction, has decided to bypass the Vickers board and present a renewed offer directly to shareholders. The move comes after a major shareholder expressed concerns that Sir Colin Chandler, the Vickers chairman, might face an investor revolt if the board ignores a concrete bid that promises more money than the £340 million offered by BMW.

Vickers, the parent company of Rolls-Royce Motor Cars, had accepted BMW's offer in principle just a week after the bid deadline, leaving other bidders, including Volkswagen, unhappy with the speed of the decision. The company's board has stated that it is currently in exclusive negotiations with BMW, which retains this privilege until the end of April.

However, a major shareholder believes that a better offer could be made by Volkswagen, potentially leading to a shareholder revolt if the board ignores this opportunity. The shareholder pointed out that the £340 million offered by BMW was not a bad price in the light of earlier pessimistic valuations.

The situation is further complicated by a clause in Rolls-Royce's contract that would require the winner of the auction to negotiate with Rolls-Royce plc, the parent company of the aircraft engine maker. This clause, which contravenes European law, would have to be addressed by the winning bidder.

Key Takeaways:

  • Volkswagen has decided to bypass the Vickers board and present a renewed offer directly to shareholders.
  • A major shareholder believes that a better offer could be made by Volkswagen, potentially leading to a shareholder revolt if the board ignores this opportunity.
  • The £340 million offered by BMW is not a bad price in the light of earlier pessimistic valuations.
  • Vickers is currently in exclusive negotiations with BMW until the end of April.
  • The contract between Rolls-Royce and its engine supplier language may require the winner to negotiate with Rolls-Royce plc.
  • The clause in Rolls-Royce's contract contravenes European law and would have to be addressed by the winning bidder.

Statistics:

  • £340 million: the amount offered by BMW.
  • £500 million: the amount reportedly offered by Volkswagen, including investment.
  • £67 million: the additional amount reportedly added by Volkswagen to its original offer.
  • April: the end of the period during which BMW has exclusive negotiations with Vickers.

Sources:

  • The Times: "Volkswagen Bypasses Vickers Board to Present Direct Offer for Rolls-Royce Motor Cars" (Exact date not specified, 1998).
  • Bild (German newspaper): "Volkswagen Prepared to Add Another DM200 Million to Its Offer" (Exact date not specified, 1998).
  • Vickers: Statement issued on Monday, accepting BMW's offer in principle (Exact date not specified, 1998).
  • Christopher Fisher, Lazard adviser: Interview, stating that nothing has changed since Monday (Exact date not specified, 1998).