LONDON - Preparing for the escalating global consolidation wars, LucasVarity plc last week moved to relocate its headquarters from London to Buffalo, New York, and reorganize itself as a US company.
Lucas has applied to have its shares listed on the New York Stock Exchange. The company supplies braking systems, diesel fuel-injection systems, electrical systems and electronic components.
LucasVarity officials listed three main reasons for the move:
It will be closer to its public company peers.
Its cost of capital will be lower.
It will be in a better position to compete for potential acquisitions.
Also Buffalo is closer to Detroit, home of LucasVarity's biggest customer, General Motors. And Buffalo was home to Varity Corp., Victor Rice's company that took over Lucas Industries plc in 1996. Rice has a house there.
The deal calls for every 10 ordinary shares in the existing UK corporation to be exchanged for a share of a newly formed US company, LucasVarity Corp.
Robert Speed, research director at London-based brokerage Henderson Crosthwaite, said: 'The task that faces management is to try and generate sufficient support in the USA to buy half the company,' the half UK shareholders would probably be selling as a result of the transaction.
US shareholders now own about 47 percent of the company, the same as UK shareholders. Following approval of the domicile change, LucasVarity plans to repurchase up to 20 percent of its shares.
Sales of LucasVarity's automotive units were £3.4 billion ($5.6 billion) last year.
LucasVarity automotive units moved to Michigan last month. Only a few corporate employees will relocate to Buffalo. European headquarters will remain in London.