Unipart fights off Rover's embrace

UNIPART, the car-parts company, is urgently seeking new investors in a move to fight off a bid approach from its erstwhile owner, Rover Group, industry sources say. There are reports that John Neill, Unipart's chief executive, has talked to Honda and Lucas as well as to various City institutions.

Rover made an offer of about pounds 300m for Unipart in March, but was rebuffed by Mr Neill. Since then there have been no talks between the two sides, and Rover has been looking for other ways of buying the unquoted company. It has a 20 per cent shareholding, while most of the balance is held by Electra, Standard Life and 3i. Rover will have to convince at least two of these that they should sell.

Unipart said last week it was determined to stay independent. However, City sources said it would make sense for Mr Neill to approach Honda and Lucas. He has worked closely with the Japanese company, using its techniques as well as supplying it, while Lucas is also a leader in the Japanese- style manufacturing techniques he so admires.

Unipart was the parts division of British Leyland, now Rover, until it was bought by a management team led by Mr Neill in 1987. He had already turned round the distribution business, but since then has been concentrating on the manufacturing operation. Unipart's turnaround is widely considered a textbook management exercise. It is admired for its emphasis on staff care and training, and has even set up a Unipart "university". Profits rose steadily through the recession, and were up 22 per cent at pounds 16.3m in the first half of this year

About 70 per cent of the company's profit still comes from Rover, with which it has an exclusive supply contract that expires in 2002. The manufacturing division has also won business from the Japanese manufacturers in Britain, including Honda. Last week it announced it had won a contract to supply Mercedes.

Rover has grown unhappy with Unipart's distribution side, industry sources say. It is the only volume car producer that does not own its own spare- parts operation, and is worried that Unipart will not want to follow Rover sales as they spread outside Europe; this year more than 100,000 Rovers and Land Rovers will be sold outside the continent for the first time. It also believes Unipart-branded parts are increasingly being marketed in competition with Rover.

The car company has been negotiating to buy a site near Oxford where it could build its own parts distribution warehouse if necessary. This is seen by the industry as a device to pressurise Mr Neill into negotiating.

The company hopes that the venture capital shareholders will want to realise their investment, which they have held for eight years. Mr Neill shows no sign of wanting to float Unipart so will have to find some way of satisfying the companies that do want an exit. 3i has shown itself willing to hold investments indefinitely, but other venture capitalists have not.