BMW stepped out of the bidding war for Rolls-Royce Motor Ltd. on Friday, leaving rival German auto maker Volkswagen in the lead to win the luxury auto maker a day after Vickers accepted its sweetened offer.
But Volkswagen faces major hurdles--including a battle to use the Rolls brand name--in gaining control of Rolls even if Vickers' shareholders choose its $705-million offer at their meeting next month.
BMW repeated its threat to cancel contracts to supply Rolls with engines and components, which account for about 30% of the new Rolls Silver Seraph and Bentley Arnage, if it loses the bid.
And VW may find itself caught in the middle of a legal tussle between Vickers and defense company Rolls-Royce, which preferred the BMW bid for the auto maker. The defense company said Friday that the European Commission had backed its ownership rights over the brand name for now.
The comments triggered a heated response from Vickers, which said the EC had not yet made its final judgment.
The defense company Rolls, which has an aircraft engine joint venture with BMW, had said it retained the right to withdraw the brand name if the prestigious auto maker was sold to a foreign buyer, but it had favored BMW over VW to acquire Rolls.
VW would have to bear the full risk of possible court action or loss of the ultimate prize--the Rolls brand, Vickers said.
Vickers' surprise announcement on Thursday that it endorsed VW's higher offer came after Vickers' management came under fire from shareholders when they agreed in April to negotiate exclusively for a month with BMW.
Vickers has made clear that the bid process is not closed yet.
The group's shareholders will have their say on both offers June 4 at a special meeting in London, with 95% of the shares held by institutional investors.
Bloomberg News and Reuters were used in compiling this report.