VW Gets Rolls

[Ricardo Higgins <rich@amcc.com>]

Vickers accepts VW bid for Rolls-Royce
                           By David Crossland

                           FRANKFURT, Germany (Reuters) - Vickers Plc
said Thursday
                           it had accepted an offer from Volkswagen AG
for Rolls-Royce
                           Motor Cars, terminating an earlier deal to
sell it to BMW AG, but
                           analysts said the battle between the two
German automakers for
                           the luxury car line was not over.

                           Vickers said in a surprise announcement
that it agreed to the sale
                           with VW, which made an improved cash offer
of 430 million
                           pounds ($714.4 million), 90 million pounds
($150 million) higher
                           than the BMW bid it accepted last week.

                           It said Vickers shareholders would have the
final say at
                           extraordinary meetings June 4, at which the
directors of Vickers
                           intended to recommend a sale to VW.

                           BMW, which already supplies engines for
some Rolls-Royce
                           models, declined to comment immediately,
but industry analysts
                           said the carmaker was likely to improve its
offer.

                           Juergen Pieper, at Deutsche Morgan Grenfell
in Frankfurt, said:
                           "We still don't assume that Volkswagen has
clinched the deal. We
                           still favor BMW to get the final nod, but
the race is certainly open
                           now. BMW is likely to put another offer on
the table and if that is
                           again higher than VW's, BMW will clinch
it."

                           VW also appeared to acknowledge that the
battle was not over.
                           VW spokesman Klaus Kocks said: "We're
looking toward the
                           further developments in England with
confidence, but also with the
                           necessary respect."

                           VW's cash offer does not include Vickers'
Cosworth unit, which
                           supplies engines to Rolls-Royce. However,
BMW also supplies
                           engines for some Rolls-Royce models.

                           VW had advised Vickers that it preferred to
source engines for
                           Rolls-Royce from within Britain, Vickers
said.

                           Vickers management last week agreed to sell
Rolls-Royce to
                           BMW for 340 million pounds ($565 million)
but subsequently
                           reviewed a higher offer from VW after a
temporary period of
                           exclusive negotiations with BMW expired
April 30.

                           VW said last Saturday it remained intent on
pursuing the deal.
                           Both it and BMW want Rolls-Royce to give
them a strong
                           foothold in the lucrative luxury car
market.

                           Analysts said that if the bidding war went
on, both VW and
                           BMW could lose out.

                           "I think this is probably actually bad for
both ..." said Christian
                           Breitsprecher, analyst at Trinkaus Capital
Markets in
                           Duesseldorf. "This means that BMW does not
get the strategically
                           useful target it was looking for and VW
gets to pay too much for
                           it."

                           Vickers said its decision to sell
Rolls-Royce to VW was aimed
                           purely at seeking maximum value for its
shareholders.

                           Vickers chairman Colin Chandler said he was
confident
                           Rolls-Royce had strong prospects with
either BMW or VW.

                           "Both are leading players in the luxury
automotive segment,
                           capable of continuing to develop this
premier business," he said.

                           Philippe Houchois, an analyst at Standard &
Poors DRI in
                           London, said that without Cosworth, VW's
offer was an "amazing
                           premium for Volkswagen to pay."

                           Vickers has pointed out that there are two
potential problems for
                           any rival bidder to BMW. First, the
existing engine supply deal
                           between BMW and Rolls-Royce and second, the
problem over
                           the trademark with aircraft engine maker
Rolls-Royce Plc.

                           BMW has reached agreement with Rolls-Royce
Plc, which owns
                           the Rolls-Royce brand name, to use the
Rolls-Royce trademark,
                           and another bidder would have to reach a
similar deal.