Phoenix sells MG Rover parts arm to Caterpillar for £100m
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Your support makes all the difference.Phoenix Venture Holdings, the owner of MG Rover, yesterday raised more than £100m by selling the loss-making car manufacturer's profitable parts business to the US construction equipment giant Caterpillar.
Phoenix Venture Holdings, the owner of MG Rover, yesterday raised more than £100m by selling the loss-making car manufacturer's profitable parts business to the US construction equipment giant Caterpillar.
A spokesman for Phoenix, which is controlled by four West Midlands businessmen, insisted that the proceeds of the sale would be re-invested in the car business. "There is absolutely no question of any of the directors taking a share of the proceeds of this transaction," he added.
The Phoenix Four as they have become known, were heavily criticised earlier this year by the chairman of the Commons Trade and Industry Select Committee, Martin O'Neil, for "financial sleight of hand" in the way that they had made millions of pounds by transferring profitable parts of the MG Rover business into their direct ownership. The Phoenix chairman, John Towers, himself a former chief executive of Rover, came in for particular criticism. Kevin Howe, the chief executive of MG Rover, said the money would be invested in its car manufacturing operations ahead of the company's planned strategic alliance with China's Shanghai Automotive Industry Corporation.
The parts sell-off brings the total raised by Phoenix from asset disposals to around £160m. Earlier this year, it sold half of MG Rover's Longbridge site in Birmingham to the property group St Modwen for £42.5m, and last year it raised £16.6m through the sale of another parcel of land to Advantage West Midlands.
Phoenix will receive an undisclosed share of the future profits from the parts business and also has the right to buy the business back from Caterpillar in 2008 or 2009. The parts business sources, distributes and sells components and accessories to MG Rover's worldwide dealer network, helping to support some 2.5 million MG Rover cars which are still on the road.
Caterpillar Logistic Services has managed the business for MG Rover since 2001 after it won the contract from Unipart.
The Phoenix spokesman denied that the parts sale was an indication that MG Rover is running out of cash. It received a £500m dowry from BMW when the business was sold for a nominal £10 four years ago.
Phoenix lost £95m in 2002 and as of December that year, it had net cash of £315m. It is yet to publish its accounts for 2003, although Mr Howe has said the car company will not make a profit until 2006.
Reaching a successful agreement with Shanghai Automotive, China's biggest car producer, will be vital to the future of MG Rover. It will enable the company to develop a range of small and medium-sized cars and should also lead to manufacture under licence of the top-of-the-range Rover 75 in China.
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