LucasVarity’s US ambitions anger investors

Disgruntled investment institutions could block LucasVarity’s bid to seek a listing on the New York Stock Exchange. Chief executive Victor Rice last month startled investors with plans to switch the automotive and aerospace group’s domicile to the US. He cited the greater cost of raising capital in the UK as one of the reasons, but […]

Disgruntled investment institutions could block LucasVarity’s bid to seek a listing on the New York Stock Exchange.

Chief executive Victor Rice last month startled investors with plans to switch the automotive and aerospace group’s domicile to the US.

He cited the greater cost of raising capital in the UK as one of the reasons, but he also blamed the low rating of engineering stocks on the London Stock Exchange.

The decision has angered some UK investors who feel they stand to lose.

One analyst said: ‘Getting UK shareholders to vote for the change of domicile is like getting turkeys to vote for Christmas. What do UK investors get out of it?’

An institutional investment source added: ‘There is a very real possibility that the resolution may not be passed. The board should fully explain why it is in the interests of shareholders.’

UK investors constitute 44% of LucasVarity’s shareholder base, with most of the rest in the US.

If Rice does not get 75% support at a special shareholder meeting on November 7, his position will become untenable, analysts believe.

LucasVarity tried to quell the growing clamour from institutions with a letter reiterating its case last week.

But the move cut little ice with investors. They question the wisdom of Rice’s strategy to gear up in the US for big acquisitions when stock markets are in freefall around the globe.

Some analysts and investors even suspect personal motives may lie behind the move to list in the US, a suggestion LucasVarity vigorously denies.

Recent changes to the rules governing the company’s executive share options mean that performance conditions will not apply to a US-listed LucasVarity Corporation.

Instead, the board has plumped for a revised set of criteria for measuring performance which some UK investors believe is less onerous.

LucasVarity’s most influential shareholders include Mercury Asset Management, Schroder and Legal & General.