Cuts to come if T&N takeover bid succeeds

Federal-Mogul offer likely to be rejected in tactic to raise price

The proposed takeover of automotive engineering group T&N by US firm Federal-Mogul could result in some ‘trimming back’ in their bearings businesses where there is a degree of overlap.

A combined company, said City analysts, would be bound to look for savings between T&N’s £350m turnover bearings group, which includes the Glacier Vandervell businesses and Federal-Mogul’s own.

Federal-Mogul said at the end of last week it intends to make a bid for T&N. It wants to increase sales from $1.8bn to $10bn by 2002.

‘There’s been a lot of consolidation with automotive suppliers, we want to be an engine systems supplier,’ said a spokeswoman. ‘T&N has a very good business in gaskets, which will complement our seals.’

Its proposed bid valued the company at 235p a share, or £1.3bn. The takeover had not yet been endorsed by Federal-Mogul’s board.

The US firm said T&N’s pistons, gaskets and friction products would complement its own component portfolio of gaskets, fuel systems and chassis products for cars and light trucks.

Federal-Mogul is three quarters the size of T&N, and would have to fund the acquisition by debt.

The deal met approval in the City, and is likely to fuel support among T&N’s shareholders, although many expect them to hold out for a higher price.

‘We believe the takeover has an industrial logic,’ said Robert Speed, research director at broker Henderson Crosthwaite.

T&N has been vulnerable to takeover activity since its historical asbestosis claims of £350m which knocked its share price to a low of 119p.

Any other potential bidders are expected to be flushed out by the US offer. UK-based rivals GKN and LucasVarity would not comment on speculation about mounting a rival bid. Analysts expect T&N to reject the bid to get a better price.