LucasVarity admitted last week that it was in talks with several other automotive parts and engineering companies that could lead to a merger or other strategic partnership.
But the company denied it was set for any imminent tie up with either TRW or Tenneco, the two US components suppliers with which it has been most closely linked by sector analysts.
TRW’s automotive manufacturing operations include airbags, seatbelts, steering and suspension systems. It also has activities in the space and defence electronics industries.
The automotive arm of Tenneco generated sales of $3.2bn (£1.95bn) in 1997, almost half of the group’s total. Its main products are in exhaust systems and shock absorbers.
A LucasVarity spokesman insisted that merger was just one of ‘several options’ it was considering.
‘We are talking to a number of companies about joint ventures, acquisitions, disposals, alliances and mergers, and other combinations,’ he said. ‘None of the talks is at a particularly advanced stage.’
Analysts, however, believe that a merger or other collaboration with a US company could enable chief executive Victor Rice to resurrect plans for a change of domicile to the New York Stock Exchange.
A shareholder vote late last year narrowly failed to secure the necessary 75% majority needed to approve the move.
A transatlantic merger deal has been the long-standing ambition of Rice. He has argued that a move would improve the rating of the shares, cut the cost of capital and put the company at the heart of the action as industry consolidation accelerates.
Not all analysts agree, however, and several claim a deal with TRW or Tenneco could be seen by UK investors as another attempt to change the company’s domicile.
UK-based sector watchers also believe that an agreed merger deal could prove less lucrative and therefore less attractive to shareholders than a premium-paying takeover of LucasVarity.
A strategic review at the company is under way. It will address all LucasVarity’s options and the results of the work will be announced with its full year results in March.