Rolls-Royce Changes Lanes, Takes VW Bid

Britain’s Vickers said in a surprise announcement Thursday that it has accepted an offer from Volkswagen for its Rolls-Royce Motor Cars, terminating an earlier deal to sell it to BMW. However, analysts said the battle between the two German auto makers for the luxury car line is not over.

Vickers said VW made an improved cash offer of $714.4 million, $150 million higher than the BMW bid Vickers accepted last week. It said company shareholders will have the final say at special meetings June 4, at which the Vickers board intends to recommend the VW proposal.

BMW, which already supplies engines for some Rolls-Royce models, declined to comment immediately, but industry analysts said the company is likely to improve its offer.

“We still don’t assume that Volkswagen has clinched the deal,” said Juergen Pieper at Deutsche Morgan Grenfell in Frankfurt. “We still favor BMW to get the final nod, but the race is certainly open now. BMW is likely to put another offer on the table, and if that is again higher than VW’s, BMW will clinch it.”

VW also appeared to acknowledge that a fight may loom.

“We’re looking toward the further developments in England with confidence, but also with the necessary respect,” VW spokesman Klaus Kocks said.

VW’s cash offer does not include Vickers’ Cosworth unit, which supplies engines to Rolls-Royce.

VW had advised Vickers that it would prefer to buy engines for Rolls-Royce from within Britain, Vickers said.

Vickers management last week agreed to sell Rolls-Royce to BMW for $565 million but subsequently reviewed the higher offer from VW after a temporary period of exclusive negotiations with BMW expired April 30.

VW said Saturday that it remained intent on pursuing the deal. Both it and BMW want Rolls-Royce to give them a strong foothold in the lucrative luxury car market.

Vickers said its decision was aimed purely at seeking maximum value for shareholders.