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Friday, Jan. 29, 1999

TRW will acquire British brake maker LucasVarity

$7 billion deal not closed; other acquisitions already sought

By M.R.KROPKO
Associated Press

   CLEVELAND - TRW Inc. has an agreement to acquire LucasVarity PLC, a highly coveted British maker of automotive brakes, for $7 billion in cash and executives of the two companies are said to be looking for acquisitions, with Tenneco Co. among their top targets.
   But the bidding for LucasVarity may not be over.
   While LucasVarity accepted TRW's offer Thursday, a rival suitor, Federal-Mogul Corp., said it may sweeten the $6.5 billion cash-and-stock offer that LucasVarity rejected earlier this week.
   TRW and LucasVarity, meantime, already are looking for other auto parts and aerospace companies to buy, and Tenneco is a prime candidate in the automotive sector, according to an industry analyst who met with the companies' executives Thursday.
   "There's still another acquisition to come for TRW and LucasVarity, and I guess the first one they had in mind is Tenneco," said John Daviduk, an analyst with Credit Suisse First Boston.
   That would make sense, he said, because Tenneco was also involved in negotiations with LucasVarity before the deal with TRW was announced. Both TRW and LucasVarity also make aerospace equipment.
   

`Size does matter'

   The automotive supply industry has been consolidating rapidly. The combination of TRW and LucasVarity would be the fifth industry merger in 1999, according to Securities Data Co. There were 80 combinations in 1998 for a total value of $11.2 billion.
   Joseph Gorman, TRW's chairman and chief executive officer, said the company doesn't want to be left out of the consolidation trend in the automotive industry, pointing out the deal came on the same day Ford Motor Co. agreed to buy the passenger car division of Sweden's Volvo AB for $6.45 billion.
   Gorman said that as the world's major automakers continue to expand and combine, they will be most interested in working with two or three major suppliers with a proven track record. "Size does matter," he said.
   

`A wonderful fit'

   Gorman and Rice said the auto industry is demanding that its suppliers provide increasingly complex systems that can more easily fit right into a vehicle.
   "TRW's steering and suspension and LucasVarity's brakes and antilock brake systems are a wonderful fit in terms of what you can offer for the customer," Rice said.
   

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