Last shots in fight for Rolls

Vickers shareholders vote this week on the car maker's sale. BMW or VW will win, sentiment will lose

THE EIGHT-month-long auction for Rolls-Royce Motor Cars reaches its climax on Friday at an extraordinary meeting for Vickers shareholders to vote on the rival bids from Volkswagen and BMW. Both bidders are cautious on their prospects for victory.

While VW is expected to win the auction with its pounds 430m bid, it is not taking any chances and company representatives are meeting this weekend to discuss the final week of battle. Chief executive Ferdinand Piech said he thought VW only had a "50/50 chance" of winning.

BMW, whose pounds 340m bid remains on the table, says it does not plan "to sit in a corner" and will try to win Vickers shareholders over to its side but denied reports that it was planning a higher last-minute offer.

"I don't think we have seen the end of the game," said Guy Hewett, an analyst at Charterhouse Tilney in London. "BMW wants Rolls just as much as VW, but I can't see any way of winning without raising the bid."

The drawn-out fight for Rolls, played out as much in the media as in the boardroom, reflects the importance the two car makers attach to acquiring a top-sector brand that will contribute more to prestige and image than earnings as both companies look to expand their model ranges across all segments.

About 500 Vickers shareholders are expected to turn up on Friday at the Horticultural Halls in London at 10 am to vote on who will be the next owner of the world's most prestigious car marque. A lively debate is expected with some smaller shareholders, keen to keep the brand British, likely to complain at the sale of Rolls to a German company.

Both the BMW chief Bernd Pischetsrieder and Mr Piech have sought to deflect national sentiment over the sale of Rolls by promising to maintain the "Britishness" of the company and have sketched out similar ideas for developing the Rolls-Royce and Bentley brands, including a key plan to make a new, cheaper Bentley to bump up sales volume.

Institutional shareholders, which own 95 per cent of Vickers, will be unswayed by nostalgia and are likely to vote for the highest offer. The company's largest shareholder, Schroders Investment Management, which owns about 19 per cent of Vickers, declined to comment but said the decision would be made in its shareholders' interests.

One uncertainty is Rolls-Royce plc, the aero-engine maker and owner of the Rolls-Royce name, which says it can veto the sale of the car maker to a foreign buyer. The company has publicly favoured a purchase by BMW, with whom it has an aero-engine joint venture. Its veto rights have yet to be tested in court.

"This is not a very professional way of carrying out such an acquisition. It is in complete contrast to the Daimler-Chrysler deal," said Alexander Metz, an analyst at SGZ-Bank. Daimler's $41bn (pounds 25.6bn) acquisition of Chrysler, announced earlier in May, was agreed within four months in complete secrecy.

Both Mr Pischetsrieder, a renowned anglophile who owns a vintage Rolls- Royce, and Mr Piech, grandson of the inventor of the VW Beetle, Ferdinand Porsche, have visited the UK several times to convince Vickers and Rolls- Royce management of their plans to increase investment and boost production. Mr Piech had a Rolls-Royce shipped over to VW headquarters in Wolfsburg, Germany, for a meeting with VW board members to convince them of his strategy.

The sale will mark the end of an era for British motoring as the flagship of its car industry falls into foreign hands for the first time in its 92-year history, following the same path as Rover, Jaguar, Aston Martin and Lotus.

However, analysts and car industry executives agree that the sale to a manufacturer with huge technical and financial resources is the only way to keep Rolls-Royce alive in a world where the technology and quality of many luxury sedans selling for less than half the cost equal or sometimes surpass that of a Rolls-Royce.

The BMW and VW chiefs both have impressive records in managing acquisitions, Mr Pischetsrieder with Rover and BMW and Mr Piech with VW's Audi, Seat and Skoda badges - but BMW's closer proximity to the luxury car sector is seen as an advantage

If BMW loses, it will develop its own top-range luxury car, which will be more likely to compete with the cheaper Bentleys rather than the Rolls- Royce limousines that sell for more than pounds 150,000 each.

BMW says it will develop a 9-series luxury sedan that would be more expensive than its pounds 55,000 8-series model. Mr Pischetsrieder is also reported to be considering using the Rover Group subsidiary to develop a Rolls competitor using an old British brand name like Wolseley, Morris or Riley.

Copyright: IOS & Bloomberg