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NOVEMBER 24, 1997

Cosworth waits as bidders line up for Rolls Royce

THE future of Ford's Formula 1 engine program continues to be uncertain as Vickers PLC fights to defend itself from takeover and bidders for a sister company Rolls Royce make themselves known. The Volkswagen Group is the latest car company to say it wants Rolls-Royce Motor Cars and is looking for a partnership with a British company. Volkswagen has $4.5bn to spend following the issue of six million new shares in September, which management said was earmarked for expansion. The purchase of Rolls-Royce makes little sense however and some analysts feel it is simply a way to push up the price that BMW has to pay. The extra money would, however, attract more corporate raiders for the Vickers empire.

BMW last week forced the British group Mayflower to give up its plans for a leveraged buyout of Vickers by warning that it would cut the links between Mayflower and Rover - a BMW subsidiary - if the deal went ahead. On the London stock market this move was viewed with caution as shareholders felt that by scaring off the opposition BMW is by forcing down the price and that would mean that share values for Vickers would drop further. The feeling in business circles is that if that happened the best way to get maximum value for Vickers shareholders would be to break-up the group completely - which would put Cosworth on the market.

BMW has said that it is not interested in the whole group and wants only Rolls Royce.

Daimler-Benz had also said that it is going to bid for Rolls-Royce, having announced recently that it is launching into the luxury car market.

The Sunday Telegraph in London reported that Bernie Ecclestone may also be bidding for the company. The only possible logic for this would be that Ecclestone is trying to rebuild his public image by trying to keep the company British-owned but the $1bn price tag is rather more than Bernie is likely to be able to afford or that he is acting in league with one of the other bidders.