BMW will fight VW for control of Rolls

THE BATTLE for control of Rolls-Royce Motor Cars was threatening to degenerate into an unseemly legal squabble last night after BMW indicated it would rely on spoiling tactics to thwart the agreed pounds 430m offer from its German rival Volkswagen.

BMW, whose pounds 340m bid was discarded by Rolls' parent company Vickers in favour of the higher VW offer, said it would not get involved in a "dutch auction" for the company, suggesting it will not attempt to increase its offer.

Instead BMW is relying upon Rolls-Royce plc, the aero-engine maker which owns the Rolls-Royce name, to use its legal rights to block the transfer of the trade name to VW.

As a further frustrating tactic, BMW repeated its intention to stop supplying engines for Rolls' latest models, the Silver Seraph and the Bentley Arnage, if the sale to VW went ahead - which could prompt a damages claim from Vickers.

BMW is due to outline its strategy in a statement early next week. Sources at the Munich-based company indicated it would not include an increased offer for Rolls.

Rolls-Royce plc has made no secret of its support for the offer from BMW, with which it already has a joint venture to make aircraft engines. In a statement yesterday the aero-engine group said it would "take whatever action is necessary or appropriate" to protect its interests.

The statement made no reference to VW but it pointedly "welcomed" the initial announcement by Vickers that it had agreed to sell Rolls to BMW, even though this was superseded this week by the improved VW offer.

Vickers is recommending that shareholders reject the BMW offer and instead approve the sale of Rolls to VW at an extraordinary meeting on 4 June.

In its statement yesterday the aero-engine maker said it was confident that it would be able to conclude a definitive agreement with BMW for the use of the Rolls-Royce name.

It also said that the European Commission had upheld its rights to the Rolls-Royce name under a 1973 agreement, including the right to veto the transfer of the marque to a non-UK owner.

Vickers maintains that the clause is unenforceable and a breach of EU competition law. It also argued that if the aero-engine company carried out its threat to block the deal it would end up damaging the marque. "The halo effect of the Rolls-Royce name comes from the motor car and goes to the aero-engine company, not the other way around," she added.

Under the engine contract, either party has to give the other 12 months notice of its intention to terminate the supply agreement. However, it is understood that BMW only has to give Rolls six months notice in the event that the company is transferred to a rival car maker.

BMW does not believe this would give VW sufficient time to find an alternative supply of engines, forcing it to close down the Rolls production line at Crewe.

But a VW board member, Robert Buechelhofer, indicated yesterday that it had contingency plans. "We are going on the idea that a solution of this problem would be possible in the short term," he said.

VW has offered to buy Cosworth from Vickers and then use that as a source of engine supplies. Cosworth adapts the V12 and V6 engines that BMW currently supplies for the Seraph and Bentley. VW also has its own V12 engine under development but it is not clear that would be available in time for commercial production should BMW carry out its threat to stop engine supplies.